Are Healthcare Stocks Too Expensive?

The healthcare industry has a strong structural tailwind from an ageing population but equities now attract a significant premium and are enduring regulatory risks

Dan Kemp 2 May, 2017 | 11:29AM

Healthcare had been increasingly considered a sweet spot for portfolio exposure due to the tailwinds of an ageing population. This is true at a global level, but has been especially impressive in the United States. US healthcare has experienced significant price growth over the past twelve years and commensurately attracted investors that were willing to pay higher premiums for the privilege of accessing the market.

The historical superiority of the S&P healthcare sector is clear

The challenge in a forward-looking context is to understand whether this superiority remains valid or whether the price has moved too far relative to the fundamentals. An effective means of assessing this is to look back at the underlying revenue and profitability growth of the sector at both a US and global level.

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About Author

Dan Kemp

Dan Kemp  is Chief Investment Officer, Morningstar Investment Management EMEA

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