What's next for health care stocks?

Eddie Yoon's take on what COVID-19 means for health care stocks.

  • Facebook.
  • Twitter.
  • LinkedIn.
  • Print

"While many unknowns remain regarding the economic impact of the coronavirus, I think health care fundamentals should remain resilient and demand could return faster than in other parts of the economy," says Eddie Yoon, health care sector leader and portfolio manager of Fidelity® Select Health Care Portfolio (FSPHX).

Yoon says he remains bullish on health care in general because health care innovations should play a key role in helping the world emerge from this global pandemic. This should drive further investment in life sciences research and usher in the next era of growth across the sector.

However, COVID-19 has affected groups within health care differently, Yoon says. The rate of elective surgeries is down in the short term, for example, and demand for prescription drugs remains roughly the same. "The outbreak and spread of COVID-19 have stressed the resources of some busy hospitals, and demand for personal protective equipment is very high," he notes.

Importantly, he says some companies should see both cyclical and structural benefits from COVID-19.

As for managed care, COVID-19 could accelerate the pace of change to value-based payment models, which should create a better patient experience at lower cost, according to Yoon.

Yoon points to the fund's top holding on April 30, UnitedHealth Group (UNH), as a company that appeared to be managing through the crisis. He says the company's management has done many things to offset the economic hardship that many customers and associates have faced during the pandemic, such as accelerating payments to health care providers, paying for COVID-19-related expenses without co-pays, discussing potential premium rebates to plan sponsors, maintaining its workforce at full pay, and not requesting any federal aid from the initial stimulus bill.

While there were many moving pieces that affect earnings, Yoon says the company's diversified business still allowed it to surpass first-quarter earnings expectations. In early spring, Yoon increased the fund's stake in UnitedHealth and Humana (HUM), and established a new stake in rival managed care company Anthem (ANTM).

Beyond managed care, Yoon says recent market volatility created buying opportunities in some smaller companies for which he sees long-term potential.

Fidelity® Select Health Care Portfolio held securities mentioned in this article on April 30, 2020. As of this date, UnitedHealth accounted for 8.21% of the fund's assets, Humana made up 4.55%, and Anthem 1.12%.

Next steps to consider



Find stocks


Match ideas with potential investments using our Stock Screener.



5-step guide to trading


Learn what you need to know before trading the market.

A collection of current insights from our portfolio managers.

  • Facebook.
  • Twitter.
  • LinkedIn.
  • Print
Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

Because of their narrow focus, sector investments tend to be more volatile than investments that diversify across many sectors and companies.

Stock markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. Investing in stock involves risks, including the loss of principal.

As with all your investments through Fidelity, you must make your own determination whether an investment in any particular security or securities is consistent with your investment objectives, risk tolerance, financial situation, and evaluation of the security. Fidelity is not recommending or endorsing this investment by making it available to its customers.

Past performance is no guarantee of future results.

Views expressed are as of the date indicated, based on the information available at that time, and may change based on market or other conditions. Unless otherwise noted, the opinions provided are those of the speaker or author and not necessarily those of Fidelity Investments or its affiliates. Fidelity does not assume any duty to update any of the information.

Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917

857246.106.0
close
Please enter a valid e-mail address
Please enter a valid e-mail address
Important legal information about the e-mail you will be sending. By using this service, you agree to input your real e-mail address and only send it to people you know. It is a violation of law in some jurisdictions to falsely identify yourself in an e-mail. All information you provide will be used by Fidelity solely for the purpose of sending the e-mail on your behalf.The subject line of the e-mail you send will be "Fidelity.com: "

Your e-mail has been sent.
close

Your e-mail has been sent.