1. SECTOR PRESENTATION - HEALTHCARE
Anthony Rogers, Thomas Rosol & Dylan Seymour

2. Agenda Overview Business Analysis Economic Analysis Financial Analysis
Healthcare Industry Rogers, Rosol & Seymour
Agenda
Overview
Business Analysis
Economic Analysis
Financial Analysis
Valuation Analysis
Recommendation

3. Healthcare is a $4.76T Sector
Healthcare Industry Rogers, Rosol & Seymour
Healthcare is a $4.76T Sector
Source: Bloomberg; Fidelity

4. Industries Healthcare Industry Rogers, Rosol & Seymour
Source: Fidelity

5. Healthcare Industry Rogers, Rosol & Seymour
Companies
Source: Nasdaq

6. Business Analysis Overweight Healthcare?
The market appears to be heading to the phases of the life cycle where healthcare really shines.
Source: Fidelity

7. Business Analysis
Source: Fidelity

8. Business Analysis Substitutes (MED) Healthcare Industry
New Entrants (LOW)
Capital Intensive (R&D)
Economies of Scale
Patented processes and drugs
Buyer Power (LOW)
Specialization leaves buyer without options
Supplier Power (LOW)
Integration across the supply chain is unlikely
Substitutes (MED)
Generic drugs disrupt market once patents have expired
Source:

9. Business Analysis Catalysts Risks Demographics (aging population)
ACA (more people insured)
Higher drug prices
M&A may combine synergies
ACA (higher premiums)
Government intervention (Decr. Prices)
Expiring patients (more generics
High R&D costs for drugs
Loss of coverage for pre-existing conditions
Source: US Census

10. Economic Analysis:
Health Index & CPI – 5 yrs
Source: Bloomberg

11. Economic Analysis: Health Index & UM Confidence– 5 yrs
Source: Bloomberg

12. Health Index vs. $/£ – 5 yrs
Economic Analysis:
Health Index vs. $/£ – 5 yrs
Source: Bloomberg

13. Financial Analysis:
Source: Bloomberg

14. Financial Analysis:
Source: Bloomberg

15. Financial Analysis:
Source: Bloomberg

16. Financial Analysis:
Source: Bloomberg

17. Valuation Analysis:
Source: Fidelity

18. Valuation Analysis: Healthcare Industry Rogers, Rosol & Seymour
Source: Bloomberg

19. Valuation Analysis:
Health Index & SPX Index – 5 yrs
Source: Bloomberg

20. Valuation Analysis Healthcare Industry Rogers, Rosol & Seymour
Source: Fidelity

21. Valuation Analysis:
Source: Bloomberg

22. Valuation Analysis:
Source: Bloomberg

23. Valuation Analysis: Bollinger Bands Wider bands = greater volatility.
Lines plotted at an interval around a moving average with two standard deviations. Used to determine overbought and oversold zones, to confirm divergences between prices and indicators, and to project price targets.
Wider bands = greater volatility.
Source: barchart.com

24. Valuation Analysis: Trend Spotter
Computerized trend analysis system that uses wave theory, market momentum and volatility to find a general trend for a specific market.
Attempts to cut losers early and let winners run.
When there is a single dot above the price, this is a resistance point and represents a bearish trend.
When there is a dot below the price, this is a support point and represents a bullish trend.
When there are 2 dots, one above and one below the price, this represents a neutral or hold trend
Source: barchart.com

25. Healthcare Industry Rogers, Rosol & Seymour
Recommendation
SIM Portfolio is currently weighted evenly with S&P at about 14.65% of the total portfolio
We recommend OVERWEIGHTING Healthcare slightly at closer to 15% of the portfolio
Potential: Aging population and Affordable Care Act (more covered by healthcare)
Risks: Affordable Care Act (Loss of Coverage, Preexisting Conditions, Unaffordable)
Industries:
OVERWEIGHT – Healthcare Providers and Services (aging population is driving the amount of service demanded upward quickly)
UNDERWEIGHT – Healthcare Equipment and Supplies (recent struggles earning positive returns)