Bullish on healthcare, diagnostic space; positive on OE auto cos: Invesco MF

There is a massive online opportunity in the pharmacy business, said Taher Badshah, CIO–Equities, Invesco Mutual Fund. He also mentioned that they like the healthcare, diagnostic space. He believes that investors need to be very stock-specific post recent run as corporate earnings will take centre stage from here on and liquidity support will be gradually pulled back in 2022.

“Earnings probably will take centre stage and will be a larger part of the overall driver of the market. Therefore, it is important to find out which are the pockets where you will probably be a little better off in terms of the overall earnings growth,” he said.

On the healthcare, diagnostic space, he said, “We like the space from the point of view of the overall trend, both in terms of the non-COVID kind of business coming back over a period of time, and although it will probably have some repercussions on margins, etc., but there is the expectation of more realistic growth. The whole pharmacy and online opportunity also will start manifesting itself and it is partly driving up the valuations or supporting the valuations of some of these companies.”

“There are a couple of chains which are clearly emerging strong. We have some bit of appetite here; we have a certain amount of positioning. This is a sector which can also at one level act as a defensive in a market which is slightly elevated in terms of the overall valuation,” said Badshah, in an interview to CNBC-TV18.

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On auto space, Badshah said, “Till now, we were largely focused on the ancillaries; from here on, we are turning a lot more constructive on OE (original equipment) auto companies. This is one pocket, which is actually a consumer of commodities and has been badly hit on account of commodity price pressures. At this stage, I would rather play OE companies for cyclical play, than try to differentiate them with regard to their EV (electric vehicle) capabilities - they are still not fully tested, fully proven and are still evolving, and it is going to take some time for us to differentiate one versus the other.”

“It is best to avoid pockets that are in direct confrontation with EVs, so commercial vehicles, tractors to a good degree and auto ancillaries, which are relatively EV neutral, are more preferred and then you can start playing some of the others, essentially from a cyclical upside, both in terms of recovery of volumes as well as profitability,” he explained.

On new-age companies, he said, “What we are basically trying to rationalise here is- look at companies that have a significant head start, competitive advantages, which are a lot more durable than others. Along with which, if they are in a situation where they are reasonably profitable from day one, and also the customer base is significantly strong, that makes for a good starting point.”

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