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Our investment professionals share and challenge each other’s views, creating a diverse marketplace of ideas for the Wellington Blog.

At Wellington, we have long believed that strong environmental, social, and governance (ESG) ratings and characteristics can generate value for shareholders and improve a company’s long-term investment performance. We believe this applies broadly across market sectors and have established frameworks — what we call “research playbooks” — for evaluating companies within each sector based on various ESG criteria that we deem to be of material importance.

Here we look at the health care sector, to be followed by other market sectors in future blog posts by our ESG team.

Key ESG issues for the health care sector

ESG is of course just one input into our investment team’s multi-pronged fundamental analysis of…

SUSTAINABILITY
lindsay blitstein
Lindsay Blitstein
CFA
ESG Analyst
Boston
Carolina San Martin Headshot
Carolina San Martin
CFA
Director, ESG Research

The relative performance of the managed care industry has struggled somewhat over the past several months, begging the question: What’s the prognosis from here? Following in-line fourth-quarter 2020 earnings releases and conservative 2021 outlooks from most managed care organizations (MCOs), the short answer is: Probably better than many investors think.

Most MCOs have been sounding the same theme around forward guidance lately, citing an array of opposing forces amid the ongoing COVID-19 pandemic. Of course, no two MCOs are exactly alike. The magnitude of the headwinds and tailwinds in each case depends on company-specific factors, including the MCO’s mix of exposures (i.e., commercial, Medicare, Medicaid).

However, I believe many of the headwinds facing the group are likely to be…

MARKETS
THEMES
David Khtikian
David Khtikian
CFA
Global Industry Analyst
Boston

COVID-19 has disrupted a lot of things we took for granted, including how we try to manage our health. Odds are, unless someone needed urgent care in 2020, they avoided entering health care facilities and postponed many medical procedures to a later date. This trend has formed an interesting investment proposition, as previously stable surgical demand now appears positioned for a cyclical recovery.

In the recent market recovery, where there has been rotation into so-called “COVID losers” on hopes of vaccine breakthroughs, I believe investors may still be overlooking an opportunity in deferred surgery stocks within the health care sector — specifically, makers of medical devices, supplies, and equipment. Many of these stocks are likely to benefit from positive vaccine developments and gradually reopening economies in 2021, as consumers begin to regain confidence in accessing the health care system to meet their general medical needs.

Adding to my conviction, most of this industry’s products and services are not really discretionary in nature, as no one truly “elects” to undergo surgery. Many of the elective procedures that were put off in 2020 cannot be…

THEMES
Fayyaz Mujtaba
Fayyaz Mujtaba
Global Industry Analyst
Boston
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1. When might a COVID vaccine become available?

In light of the recent positive news on the COVID vaccine front, it is possible that a vaccine could be authorized for use in the US as early as late 2020. Additional vaccines could be authorized or approved during the first quarter of 2021.

The logistics of vaccine distribution will be daunting. Under Operation Warp Speed, vaccine developers have already been manufacturing vaccine inventory at some risk, in anticipation of favorable efficacy and safety data. Nevertheless, the immediate demand will likely far exceed the initial supply.

Priority will be given to high-risk health care workers and first responders; then to people of all ages with comorbid conditions that put them at elevated risk of poor outcomes, along with older adults living in crowded circumstances; then to all adults over age 65; and so on. It’s likely to be well into 2021 before everyone in the US can be offered a vaccine.

2. What’s the prognosis for those infected?

It’s a moving target and depends on several factors, including the underlying health and age of the patient, the ever-improving medical knowledge of optimal case management, and the availability of medications active against the virus.

The observed death rate from COVID-19 has dropped considerably since the pandemic first reached the US and now stands at…

CORONAVIRUS
THEMES

ARCHIVED

Bob Deresiewicz
Bob Deresiewicz
MD
Global Industry Analyst
Boston
Wen Shi
PhD, CFA
Global Industry Analyst
Boston, MA

The health care sector is in the midst of some exciting and potentially profound changes. But unlike the shorter-term disruptions from COVID-19, many of the longer-term opportunities in the sector have yet to be reflected in health care stock prices. Looking beyond the current crisis, here are five sector trends of interest to investors that I think are here to stay:

  1. Health care infrastructure: I expect the US to take steps to shore up the nation’s health care infrastructure, given the glaring inadequacies exposed by the COVID crisis. How and where will be worth watching in the period ahead. Among other things, we may see more money put toward…
THEMES

ARCHIVED

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Ann Gallo
Global Industry Analyst
Boston
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