Since 2021, the pharmaceutical sector has pulled back sharply.
As of March 11, 2022, the National Securities Biomedical Index has fallen by 25.42%, far exceeding the broader-cap index in the same period.
Recently, medicine has rebounded, and many people have a question, has medicine bottomed out?
Let's take a look.
Where is medicine currently located?
From the perspective of the position of the index, the pharmaceutical index such as guozheng biomedicine has returned to the level before the epidemic in 2020, almost completely giving back the previous gains and returning to the starting point. From the perspective of historical experience, the past 7 years have experienced 4 large retracements, up to 45%-50%. Therefore, from the perspective of the depth of the historical correction, the current adjustment depth is close to the historical level.
Source: WIND, as of February 15, 2022
From the perspective of valuation level, the PE of the National Securities Biomedical Index is only 33.35 times, even lower than the valuation under the extreme market in 2018, setting a record low since 2015. Therefore, from the perspective of historical valuation, the pharmaceutical industry as a whole is in a low valuation position.
Source: WIND, as of March 14, 2022
From the perspective of institutional holdings, according to the statistics of Industrial Securities, the proportion of pharmaceutical stocks excluding pharmaceutical funds is currently 5.46%, which is at the lowest point in the past decade. As Buffett says, investors should be greedy when others are afraid, and the sluggish positions reflect that market sentiment is at an all-time low. (Source: Societe Generale Securities, as of December 31, 2021)
On the whole, even if the current medicine is not in the end, it is not far from the bottom.
There are three basic logics of pharmaceutical investment
- Consumption upgrades
Medicine belongs to both optional consumption and compulsory consumption, which is subordinate to the overall situation of consumption upgrading. From the perspective of international experience, with the improvement of residents' income level, the proportion of pharmaceutical consumption and the absolute value of pharmaceutical consumption will increase.
- Population ageing
Population aging is a more certain trend, and the baby boom of the 1960s has begun to retire and enter a period of medical demand explosion, and the corresponding medical demand will also increase.
- Industrial upgrading
China's pharmaceutical industry is gradually shifting from low-profit industries to higher-profit innovative drugs and other sub-industries, which is an inevitable requirement for economic development. Along with the policy changes brought about by industrial upgrading, it will further improve the industry concentration of the pharmaceutical industry and provide soil for the creation of pharmaceutical leaders.
The above three basic logics support the growth and development of Chinese pharmaceutical enterprises, although the current impact of the epidemic, consumption has been suppressed, pharmaceutical exports have declined, but the three basic logics of pharmaceutical investment have not changed.
Index investment in medicine, the preferred choice of ordinary investors
Investors may also find that although the pharmaceutical industry has recently pulled back sharply, there are also huge differences in the depth of the correction of individual stocks. Because medicine itself is a very complex, many subdivided industries, the overall fluctuation of the special industry, and the pharmaceutical industry knowledge threshold is relatively high, so mining individual stocks may not be a good investment choice for investors.
In addition, for most ordinary investors, there is not enough energy to study pharmaceutical stocks. At this time, the advantages of index investment are very obvious. Index investment can help investors grasp the general trend of the development of the pharmaceutical industry, and diversified investment methods can reduce investment risks.
There are also many related index funds, such as the Tianhong Guozheng Biomedical ETF Initiation Linkage Fund (A:011040; C:011041). The fund tracks the National Securities Biomedical Index (399441), the index has only 30 sample stocks, the concentration is relatively high, the industry leader attribute of the index is stronger, and the weighted stocks are mostly the leading bosses of the subdivision track, including vaccines, CRO, in vitro diagnostics and other sub-industries, so it is one of the current mainstream pharmaceutical indices, and the rate is much lower than that of many active funds.
In addition, if investors are worried about the current future market fluctuations, they can take the way of fund investment to invest, and the timing risk can be appropriately weakened.
【Risk Warning】The views in this article are for reference only. Index funds have tracking errors. Please carefully read the "Fund Contract", "Prospectus" and other legal documents before purchasing, and choose products that suit your risk tolerance. The market is risky and investments need to be cautious. Fixed investment is not savings, can not avoid the inherent risks of the fund, can not guarantee investors to get returns.