I Can See Clearly Now… The Rain Is Gone?

Introduction

Fifteen months ago, we initiated our Healthcare Innovation basket with a clear and (in our humble opinion) compelling long-term thesis: advances in medical technology and life sciences were on the brink of unleashing a super-cycle of more effective and efficient healthcare, and yet the market was overlooking the opportunity due to transient cyclical factors. But the situation quickly became complicated.

Almost immediately following Election Day last year, we faced Markets Gone RF-Krazy as investors panicked about the new Trump administration’s healthcare policies and the potential impact on company fundamentals and valuations. At the time, we argued that this reaction was directionally incorrect and that the administration’s new policy agenda would ultimately prove highly supportive of our healthcare industry thesis.

Since then, we’ve seen a see-saw of policy-induced freakouts and easing concerns – again ( January Musings ), again ( Healthcare’s AI-Powered Trump Card ), again ( Insuring Against Insanity ), again ( Talk to Me, Goose ), and again ( Rough Seas Make Strong Sailors ). Each time, we made the case for staying the course and used the volatility to increase our exposure to the theme. And if that was not contrarian enough, we focused our healthcare exposure on gasp small caps, the market’s ugliest step-children over the last several years.

But this conviction has been rewarded, at least in the short-term, with various proxies for our thematic staging a sharp rebound and the basket itself handsomely outperforming those proxies.

More than just a deadcat bounce, we think this the start of a multi-year industry upswing that leaves us more positive on the theme than ever before. In the pages that follow, we detail what we are watching and how we are positioning ourselves to best capitalize on this opportunity.

Patient Status: Industry Health Improves, Investors Still Feel Sick

Anyone invested in the healthcare space over the last twelve mont…