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Healthcare Sector Stock Presentation. Winter 2006 Xin Lu Hai-ran Xu. Agenda. Sector and Current Holding Recommendations Business Analysis Financial Analysis Valuation Analysis Conclusions Q&A. Sector and Current Holding. Defensive Sector Demographics-driven Prospect

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Presentation Transcript
healthcare sector stock presentation

Healthcare SectorStock Presentation

Winter 2006

Xin Lu

Hai-ran Xu

agenda
Agenda
  • Sector and Current Holding
  • Recommendations
  • Business Analysis
  • Financial Analysis
  • Valuation Analysis
  • Conclusions
  • Q&A
sector and current holding
Sector and Current Holding
  • Defensive Sector
  • Demographics-driven Prospect
  • Heavily Regulated
  • High Entry Barrier, Little Substitute
  • Vulnerable to Legal Cost
  • Generic Drug Impact
current holding
Current Holding
  • Current Holding:
    • BSX = 2.32%
    • JNJ = 3.41%
    • MRK = 5.64%
    • UNH = 1.11%
    • PFE = 3.72%

SIM percentage = 16.20%

S&P percentage = 13.58%

  • We voted to maintain current weight
recommendations
Recommendations
  • Pfizer (PFE): BUY by 110 basis point
  • United Health Group (UNH): SELL by 110 basis point
pfizer business analysis
Pfizer-Business Analysis
  • Largest Drug Manufacturer
  • Strong R&D and Marketing
  • Wide Product Lines
  • Won Patent Cases
  • Blockbuster Lipitor hurt by Zocor
  • Generous Dividend and Stock Buy-back
  • Spun off its Consumer Product Division to boost growth
pfizer financial analysis
Pfizer-Financial Analysis
  • Sales growth slowed down
pfizer financial analysis1
Pfizer-Financial Analysis
  • Volatile Before-tax Margin
pfizer valuation
Pfizer-Valuation
  • Current Price: $26.37
  • Cost: $30.57
  • Shares: 745,157
pfizer valuation1
Pfizer-Valuation

It is Cheap!!!

pfizer valuation2
Pfizer-Valuation
  • DCF Assumptions:
    • Sales growth at 3% to perpetuity
    • EBIT at 28%
    • Tax rate at 30%
    • Discount rate 9% (4.58%+0.5*6%)
    • Current Financial Structure
    • No M&A or Spin-off
pfizer recommendation
Pfizer-Recommendation
  • Target Price $31.64
united health group business analysis
United Health Group-Business Analysis
  • Health care plan industry
  • Three business units
    • UnitedHealthcare
      • mid-size local employers and consumers
    • AmeriChoice
      • State medical programs
    • Ovations
      • Health service to American over the age of 50
united health group business analysis1
United Health Group-Business Analysis
  • UNH business will go to mature
  • In 2005 10-K report
    • UnitedHealthcare increase 24% (15% from M&A)
    • AmeriChoice 9% (all from M&A)
    • Ovations 24% (4% from M&A)
  • Growth expectation of UnitedHealthcare and AmeriChoice would be lower in 2006
united health group recommendations
United Health Group-recommendations
  • Sell at Current Price $58.89
  • 52 weeks high $64.61

By the way, CEO of UNH sold stocks in February

conclusion
Conclusion

+/-

Target %

Current %

+1.11%

4.83%

3.72%

PFE

  • Cheap Stock
  • Demographics Drive Long-term Performance
  • Restructuring Boost Margin
  • Aggressive Buy-back and Generous Dividend

UNH

1.11%

-1.11%

-

  • Relatively Expensive Stock
  • Mature Business with Low Growth
  • Management Sells Stock
thank you
Thank You!

Q & A

It is time to wake up

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