The is an excerpt from an article first published in Citywire Wealth Manager on 16 August 2022.
After years of stock market leadership, US equities shared in the severe global downturn witnessed during H1 2022.
After years of stock market leadership, US equities shared in the severe global downturn witnessed during H1 2022 – as evidenced by the S&P 500 suffering its worst first half of the year since 1970.
Volatility was significantly higher during the period, as investors were confronted with multiple negative factors – including heightened inflation, monetary policy tightening, continued supply chain strains and the return of war in Europe.
However, as stock prices across all sectors – excluding energy – moved sharply lower, five fund managers capitalised on attractive entry points in several high-conviction names. Here’s how they made the best of a bad turn.
Jacob Mitchell: Founder and chief investment officer at Antipodes Partners
Leading pharmaceuticals company Merck is a quality defensive business that is not facing the same inflation pressures as other defensive parts of the market.
Almost a third of the company’s earnings come from vaccines and animal health, which have high barriers to entry, consolidated market structures and, as a result, higher profitability relative to traditional drug development.
Merck manufactures the HPV vaccine Gardasil, which has been proven to prevent a variety of cancers and has a long runway for growth – while the animal health business has high brand equity, particularly among herd animals.
In terms of its pharma business, Merck’s Keytruda is the most successful immuno-oncology drug globally. While the patent cliff begins at the end of 2028, Merck is preparing itself via combination studies with next-generation immuno-oncology drugs that could extend Keytruda’s dominance, internal pipeline development via its own R&D engine, and ample balance sheet capacity for acquisition.
You can access the original article here.
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