Mr. Depatie: Natcan Investment Management is a division of the National Bank of Canada, it's the asset management arm. Our focus is in equities and bonds. Our equities' focus is on a global basis on all-cap equities and we manage diversified funds.
TWST: Would you take us back through the last 12 months with all the turmoil in the world markets and economies, and give an overview of the global healthcare environment?
Mr. Depatie: The last 12 months have been very volatile, even for health care, and depending on the sub-sector that you look at in health care, volatility has been very, very different. Now the factors that affected health care were economically and politically related. As we know, the healthcare environment comprises over 60% of the US market, so the US economy and its healthcare sector is a big weighting in the global scheme of things.
If we center on US healthcare, as we saw the consumer hit a road bump last year, all equities related to the consumer were hard hit. Dental sectors such as aesthetics and some elective surgery sectors had difficultly and basically followed the economic downturn. Some other sectors were hard hit by political issues, namely the HMO sectors and that's ongoing. We're still in the political turmoil on the US side, so looking closely at the HMO sector is still an important aspect. We're seeing the consumer coming back, so the consumer-related sectors have been coming back slightly. Pharmaceutical has been fairly stable through all this, but it is influenced slightly on the political side. It's an industry that's being, I would say, downsized and growth mainly comes from acquisition and synergies. The biotech sector is also interesting because it's a bit sheltered from the economy and political segments. That's a sector that we also favor.
We are underweight pharmaceuticals. Pharmaceuticals are around the 60% range of market cap weighting in the index. We're basically around the 30% range because we're not seeing organic growth per se, as the size of the companies are fairly large and they need very strong products to overcome their growth rate issues.
We are overweight on the biotech side. The index is around 10% and we're more in the 20% range, as we believe that this space offers good long-term growth in new product developments and so on. The equipment area is also a large part of the healthcare, around 12%. We're also overweight on the equipment side, 20%, as they offer very balanced investments in innovation, as well as the fact that the life of their products are quite long. So we're overweight there.
The rest of the sector would be services, and we account approximately for 20%. We're slightly overweight there on the service side. Like we said, the HMO is an important part of that sector, but there's also hospital, labs and what we call the PBM sector. We've been overweight the PBMs for a long time, as they offer the biggest exposure to generic drug pricing. We also have played the rebound in the hospital sector as it also suffered from the economic downturn.
Tickers included in this excerpt: ABT, AMED, AMGN, BMRN, BSX, CRN, CVH, GSK, HMA, ITMN, MMSI, MRK, NVO, NVS, OREX, OSIP, PFE, SGP, WYE
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