Health stocks revalued for a new product cycle

FEATURE

Christophe Eggmann, manager of the JB Health Innovation fund, explains why, with the health sector at the beginning of a new product cycle, its ‘overpriced' label is unjustified.

Historically, the valuation of the healthcare sector has followed innovation cycles, which can last about 20 years. In 1999, at the peak of the last cycle, the price-to-earnings ratio of the healthcare sector was 35, before falling to a low of just under ten in 2009. It has now recovered to roughly 17.5 and as a result, the sector remains attractively valued. In fact, there is room for further price gains given the wealth of planned product innovations.  R&D The healthcare sector invests more in research and development than any other industry. In 2010, the healthcare sector acco...