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Leonard Yaffe
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I am an MD by background who runs a healthcare hedge fund. I worked as a sell-side medical analyst for 20 years, covering pharmaceuticals, medical devices, PBMs and drug distributors.
  • Medical Device Industry Consolidation To Continue 1 comment
    Jun 16, 2014 6:26 PM | about stocks: COV, KMB, SYK, BDX, HSP

    I think the most underappreciated factors behind the consolidation in the medical device sector are the favorable growth of the healthcare industry (6% vs 2.5% for US GDP), which allows for long-term planning, and the consolidation that is happening on the provider side at the local and national levels. The latter occurrence puts a premium on product line breadth and economies of scale. It is much more than the ACA...it is also hospitals buying doctor practices and health systems merging. I would expect this trend to continue. Note that I forecast industry growth to increase to its more normalized rate of 6%, given the implementation of the ACA (more people with insurance accessing the system) and the improved economy, which contrasts with the immediate prior period when people delayed non-emergent medical procedures.

    For the past two years I have been recommending commodity medical company stocks, due to the reasons cited above, Covidien is an excellent example of such a company. Other possible buyout candidates include HSP, SYK, KMB (healthcare division) and BDX.

    Disclosure: The author is long KMB, SYK, BDX, HSP.

    Stocks: COV, KMB, SYK, BDX, HSP
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  • danleeg
    , contributor
    Comments (57) | Send Message
     
    Healthcare M&A has been fun to follow... and consolidation is a great thing for shareholders! I am long VHT & IBB. Also long TBPH & THRX (...GSK needs to buy at least one!)
    16 Jun, 09:19 PM Reply Like
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