VALUE: After Hours (S08 E02): Healthcare Investing Explained

During their recent episode, Taylor, Carlisle, and Andrew Summers discussed Healthcare Investing Explained. Here’s an excerpt from the episode:

Andrew: Sure. So, I’ve spent the preponderance of my career in the healthcare sector, so that’s why we focus on healthcare. But Summers Value Fund takes a concentrated long-term approach to investing in the healthcare sector. We primarily look for special situations or companies that are off the beaten path or under-followed, under-loved. They’re usually out of favor when we buy them, and then we like to hold them for a long time until that misperception is cleared up in the market.

We started in 2018. I spent most of my career at large asset managers, including Invesco Funds and Janus Capital. I’m based in Denver. I’ve always been in Denver. But because of my healthcare orientation and background, that’s what we focus on in the Summers Value Fund.

Tobias: What are some of the unusual things about healthcare that perhaps generalists or folks in other sectors don’t know or understand that they need to know to survive and thrive?

Andrew: Yeah, healthcare is a very complex sector. The complexity really stems from the regulatory environment and the constant change that’s occurring on that front. There are different policies coming out of Washington at any given time. We’ve seen a lot of that so far under the Trump administration. But what’s happening at the FDA is another of angle to it and just of the regulatory path to getting drugs and devices to the market. So, you just have this constant change happening on the regulatory front that adds complexity that most generalists I think are not necessarily used to.

And then, of course, you have commercial dynamics that are always changing as well. The payers play a very significant role in the healthcare sector. So, you have to understand what they’re willing to pay for, what they’re not willing to pay for, and how that might be changing. On the commercial side, of course, on the government side, they’re a big payer as well. So, you have to know how CMS is viewing drugs, and devices, and the changes that are coming out of CMS. So, there’s just a lot to really digest in the healthcare sector, and that can create complexity that would make maybe generalists somewhat uncomfortable.

Tobias: I think before we came on, I was just saying that I’d seen some chatter last year on Twitter that healthcare was particularly cheap relative to the rest of the index. And it seems to follow this long cycle where– I think it might have been early 2000s where it was comparably cheap, and then it went on for a very good two-decade run. It seems to have been a little bit weaker more recently to the point where it looks like it could be a very good opportunity. But could you perhaps narrate for us why it’s had that long period of performance and what’s caused that of recent period of underperformance?

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VALUE: After Hours (S08 E02): Healthcare Investing Explained

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