SOURCE: KAISER FAMILY FOUNDATION ANALYSIS OF NATIONAL HEALTH EXPENDITURE (NHE) DATA
1970 1980 1990 2000 2010
2017
$3.49 TRILLION
0
1
2
$3 trillionTOTAL NATIONAL HEALTH EXPENDITURES
IN CURRENT DOLLARS
ADJUSTED FOR INFLATION
139
FORTUNE.COM // DECEMBER 2019
cines for pets and livestock, is “innovating with
products more than their peers are.”
In the human drug space, Nuveen’s Malik
likes pharmaceutical staple Merck for its mid-
to-high-single-digit revenue growth and solid
drug pipeline, which includes emerging drugs
to treat HIV and pneumococcal disease. Malik
estimates that Merck’s Keytruda, used to treat
certain cancers, could be the top-selling drug
in the world in five years, contributing $22 bil-
lion in revenues in 2024, helping drive margin
expansion for years to come.
Health insurers are taking the most fire in
America’s political skirmishes. But Benken-
dorf believes that “election uncertainty will
give investors a chance at a bite of the apple”
at companies that are trading more cheaply
than they otherwise would. At 17 times earn-
ings, Ben kendorf likes UnitedHealth Group.
He doesn’t think policy changes will disrupt
the insurer anytime soon, and he praises
UnitedHealth as an innovator in using data
and technology to “better manage health care
costs and drive better outcomes” for customers.Bold Bet
AS SLIMMON of Morgan Stanley puts it, “You’re
gonna make a lot more money on the insur-
ance companies than the [medical] devices”HEALTH CARE STOCKS
Election-year anxiety has kept a lid on share
prices—so it’s time to go bargain-hunting.
M
ATT BENKENDORF of Vontobel
has a message for investors:
“This isn’t rocket science—the
health care space will be in the
spotlight” for the 2020 election.
Concerns over policy (is Medicare for All to
be or not to be?) and drug prices (candidates
as far apart as Bernie Sanders and Donald
Trump promise to curb them) loom large in
investors’ minds. The rhetorical heat helps ex-
plain why the S&P health care sector has risen
only about 9% in the past 12 months, lagging
far behind the broader market.
But it doesn’t take a brain surgeon to
recognize other factors in the sector’s favor.
Aging populations in the developed world and
growing affluence in emerging markets are
generating enormous demand that’s insulated
from political winds. (One member of For-
tuneÕs Investor Round table called health care
stocks “the fattest pitch that exists” right now;
see this feature for more.) The upshot is that
the sector is full of companies that are reason-
ably priced and unlikely to suffer at the hands
of any President.
Eric Schoenstein, a managing director and
portfolio manager at Jensen Investment Man-
agement, likes Becton Dickinson, a medical-
device company that makes low-cost but
essential products like needles and syringes.
Parnassus’s Keith sees huge potential in med-
tech play Hologic for its 3D mammography
devices and other preventive-care equipment,
which generate strong recurring revenue. “Its
products are going to be relevant and needed,
regardless of what the backdrop is with the
insurance situation,” she says.
Health care spending on animals is grow-
ing just as quickly as spending on people.
AllianceBernstein’s Tierney favors Zoetis, a
company spun off from pharma giant Pfizer.
He believes the company, which makes medi-
PICKS
Becton
Dickinson
(BDX, $245)Hologic
(HOLX, $47)Zoetis
(ZTS, $118)Merck
(MRK, $84)UnitedHealth
Group
(UNH, $257)Cigna
(CI, $188)PRICES AS OF 11/08/19No Summit in Sight
The steady climb in America’s health care spending has
prompted calls for major political and economic reform.