“The future is never clear, and you pay a very high price in the stock market for a cheery consensus. Uncertainty is the friend of the buyer of long-term values.” — Warren Buffett
During the season opening baseball game for the Seattle Mariners, the Make-a-Wish® Foundation blessed a young boy who has fought cancer at Seattle Children’s Hospital for years with a run around the bases. The Fred Hutchinson Cancer Research Center also honored a lady who successfully used recent treatments to beat cancer. It was heartwarming and a reminder of what fantastic things are being done in medicine in the US.
What they didn’t do that night was flash the cost up on the big screen of the young boy’s medical care at Children’s Hospital or the money spent at the Fred Hutch to put this lady’s cancer into remission. The President didn’t tweet anything about how high the drug prices were. Amazon didn’t make any new announcement attacking the healthcare industry. Why are we happy about good outcomes, but turn right around and beat up the companies which are making these wonderful breakthroughs possible?
To quote Buffett, “the future is never clear” about the healthcare industry. We believe the uncertainty in this part of the stock market is producing behavior that is “the friend of the buyer of long-term values.” Let’s consider what we’ve known historically and what we know right now:
Healthcare normally carries a great deal of good will
Investors in pharmaceutical and biotech companies have historically carried a bit of a halo. Peter Lynch argued to watch what goes on around you and invest in things you understand. If you are taking a prescription which is making you feel better or get medical treatment which improves your life, it is pretty easy to think that thousands of other people are gaining the same benefit.
Healthcare companies overcome great risks to succeed, but can gain incredibly profitable businesses in the process.