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Sector Analysis Healthcare

Sector Analysis Healthcare. Anurup Upadhyay BUS 416 Investment Management 3/5/14. What Does Healthcare Constitute?. The Healthcare Industry. A category of stocks relating to medical and healthcare goods or services

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Sector Analysis Healthcare

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  1. Sector AnalysisHealthcare Anurup Upadhyay BUS 416 Investment Management 3/5/14

  2. What Does Healthcare Constitute?

  3. The Healthcare Industry • A category of stocks relating to medical and healthcare goods or services • Hospital management firms, HMOs, biotechnology and medical products’ providers • Typically considered defensive stocks • Typically less sensitive to business cycle fluctuations - Investopedia.com

  4. More Specifically… - Yahoo Finance

  5. S&P 500 Sector Breakdown - S & P Dow Jones Indices

  6. SMIF Holdings in HealthcareAs of 2/16/14

  7. Leading Sub-Sectors - Yahoo Finance, as of Feb. 25, 2014

  8. 2014 Global Healthcare Sector Outlook • Global health care spending as a percentage of Gross Domestic Product (GDP) to average 10.5% • Annual average spending to increase by 5.3% • Emerging markets: China, India, Indonesia, Russia, Mexico - Deloitte Touche Tohmatsu Limited

  9. Top Issues and Trends • Aging Population and Chronic Diseases • Cost and Quality • Access to Care • Technology - Deloitte Touche Tohmatsu Limited

  10. The Good News for 2014 • Biotech and medical devices and equipment rank in top five for corporate venture capital investments • Biotech second @ $644.95 million • Medical devices & equipment fourth @ 340.73 million • Research and development an economic engine in consumers’ eyes • 69% agreed in 2013 while 61% agreed in 2011 - PricewaterhouseCoopers LLP

  11. A Case For Biotechnology • Highest P/E in the industry; although volatile/unpredictable • New discoveries for disease treatment conducive to growth/gains in stockholder value • Patented biotech drugs enjoy a 12-year period of protection from competitors, guaranteeing favorable long-term returns • Hurdles: Short-term losses FDA regulation

  12. I am recommending that we buy 57 shares of Amgen, Inc. for approximately $126.18 per share for an approximate total of $7192.26. This represents approximately 2.87% of the portfolio. Why 2.87%? = S&P 500 Healthcare Weight – SMIF Healthcare Weight = 13.7% - 10.83% = 2.87%

  13. Established in 1980; discovers, develops, manufactures and markets human therapeutics based on cellular and molecular biologyadvances • Presence in more than 50 countries worldwide • Specializes in treatment of cancer, kidney disease, rheumatoid arthritis, bone disease and other serious illnesses • First-of-its-kind company to heavily research human therapeutics (eg. Immunotherapy) - Amgen Official Website

  14. Amgen, Inc. Developments 2013-14 • Amgen-BettaPharmaceuticals joint venture established in China • Amgen Astellas BioPharma K.K. announces Japan alliance • Amgen breaks ground on innovative manufacturing facility in Singapore • Amgen acquires Onyx Pharmaceuticals - Yahoo Finance, NY Times, Amgen Official Website

  15. Amgen vs. S&P 500 - MSN Money, 2014

  16. Overview & Comparison

  17. Value Line Highlights (Dec, 2013) • Timeliness: 3; Safety: 1; Technical: 3 • Strong product portfolio to facilitate continued growth, stability • Broadening customer base(Onyx) • Numerous clinical trials ongoing • A nice addition to just about any account

  18. What Do Analysts Say? • Thomson Reuters (Feb., 2014):

  19. What Do Analysts Say? • Zack’s Rating (Feb. 28, 2014): • Neutral – Outperform ($148) • One of the five strong buy stocks • Seeking Alpha (Feb., 2014) • Amgen to see significant sales growth between now and 2017 and continued sales growth through 2023 due to growth from Onyx-acquired products • Growth from Amgen's current pipeline products without even considering future pipeline products • Important to select undervalued stocks and Amgen one of them

  20. Questions

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