Healthcare sector stands out today amidst oil & gas uncertainties, supply chain concerns and AI disruption fears as it is one of the least impacted by the Gulf war and will probably emerge as a net beneficiary of AI developments rather than become a victim of it.
Pharma manufacturing is not energy intensive and oilbased chemicals are a small portion of their material costs. Supplies are well diversified – so little risk of supply shocks due to the Gulf crisis.
Contrary to popular belief, medical tourism unlikely to be significantly impacted as patients from the Gulf region account for only 1% of total patient flow.
AI tools under development will not replace doctors – but will sharpen and quicken diagnosis, leading to higher productivity.
Drug discovery lead-times are set to come down significantly with adoption of AI tools.
Anandha prefers domestic formulations business over generic exports within the pharma segment – a call that has worked well and contributed to alpha.
He is excited about CDMO, but acknowledges the inherent risks of project based work – which only means more intensive tracking of companies and broader diversification across CDMO players.
He is bullish on hospitals – his stock picks here have hugely contributed to the alpha of PGIM India Healthcare Fund.
The fund has delivered strong 1 yr performance, with a place in the top quartile of its peer set.
Anandha says that the healthcare index may seem defensive in nature, with 70% allocation to pharma majors (who continue to grow at 10-11% compounded) and only 30% to healthcare services and CDMO – which is where the growth is.
Actively managed funds like his however have a better balance between defensives and growth plays, often resulting in a 50-50 split or at times even more than 50% to growth plays.
This, he argues, is the reason why an actively managed healthcare fund like his is not just a good place to be in today’s highly uncertain world, but also merits consideration as a core holding in any equity portfolio as most diversified equity funds do not do sufficient justice to the breadth of opportunities within healthcare, due to the sector’s relatively moderate weight in market indices.