Caerus Wealth July Commentary
The COVID-19 pandemic has inevitably shifted healthcare infrastructures around the world, requiring patients to access healthcare services through technology. Key players in this market have rapidly scaled offerings in response to a need for online consultations. Pre-COVID-19, the total annual revenues of US telehealth players were an estimated $3 billion, but with the acceleration of both provider and consumer extensions of telehealth,$250 billion of the current US healthcare spend could be realized (Source). The shift in consumer demand for telehealth services is apparent with 11% use of telehealth in 2019 to a dramatic shift in 2020 with 76% of users reporting interest in the use of telehealth going forward (Source).
Currently, North America is the largest market for telehealth services and offers significant growth prospects for global and local players, which can be attributed to the increased preference for e-visits and online consultations, coupled with supportive insurance infrastructures and the presence of established market players. The market in Europe will be characterized by uptake of health monitoring devices and advancements in telehealth services, while in Asia-Pacific, the unmet needs of large, rural populations will open avenues for market expansion in the coming years (Source).
With this in mind, 2020 will be the year of consolidations in the telehealth industry. We will begin to see industry players advance with new telehealth initiatives, pilot healthcare programs and digital devices that will improve existing healthcare delivery systems. For example, companies such as Kaiser Permanente have sought to reduce operational costs for duplicative functions that practitioners would be required to invest time and capital within the realm of telehealth. Specifically, they have initiated mergers and acquisitions to create an integrated healthcare system. Shared resources will drive down operational costs leaving more time to allocate on patients inevitably increasing volume and improving the standard of care (Source).
Client Benefits
The most salient benefit that virtual care offers patients is convenience. Individuals can receive care from the comfort of their homes. The convenience of virtual care inadvertently makes it easier for patients to reach out to their physicians with any questions they may have, report early warnings and make follow-up appointments to ensure that they are on track with their healthcare needs. Patients can thus address healthcare issues quickly with real-time urgent care consultations.
Technology also has the potential to improve the quality of healthcare, making it accessible to individuals who have reduced barriers to access, such as living in a remote community, mobility issues or an inability to take time off of work.
A local Vancouver company, WELL Health Technologies is a leader in the field of consolidating Canadian medical practices and streamlining medical systems with their proprietary software. With WELL Health’s platform acting as the intermediary between the physician and the client, the physician can go beyond brick-and-mortar facilities, extending hours and creating new and more convenient models for their patients. WELLHealth Technologies has formed “WELL Digital Health Apps Inc.” (or “WDHA”), a new subsidiary solely focused on developing, investing in and unlocking opportunities associated with digital health applications or”apps”
Covid-19 Created Opportunities
Some companies have been thriving due to dramatic shifts in consumer behaviour and preferences during the upheaval of the pandemic. Specifically, Lululemon (LULU) and Shopify (SHOP), which were added to our portfolios this month of July. Shopify is an e-commerce platform for online retail stores. With the rapid shift of online commerce and disruption to conventional employment during the pandemic, the company benefited as represented in their second-quarter results, whereby a 97% increase in revenue year-over-year was reported. Lululemon is a global leader in athleisure, which has become a huge business opportunity for the company during the pandemic comfortability and home workout trend. This has been a major shift away from gyms and in-person recreational classes. It would appear Lululemon shares are hitting new highs and we believe that the company will be positioned in a positive manner post-COVID, especially with their recent acquisition of Mirror.
Vaccine
On July 27, 2020, Health Canada granted authorization for the use of Veklury (Remdesivir) to treat COVID-19, however, this is because there are still no vaccines authorized. We have allocated investment in two leading vaccine companies, Astrazeneca (AZN) partnered with Oxford University and Moderna (MRNA). AZN is currently in its late stage of two clinical trials and has remained committed to bringing equitable access to the vaccine should trials prove successful (Source). MRNA has begun phase three of mRNA-1273, as well as planning for pricing to allow for broad access to the vaccine upon completion (Source).
Caerus Private Wealth Portfolios
The COVID-19 pandemic has sparked dramatic shifts in various industries from healthcare to retail. With more individuals staying at home to prevent the spread, the companies that are thriving are ones that have been able to adapt and utilize new technologies to accommodate changing consumer preferences. We see an increased demand for comfortable home office clothing, streamlined medical software support and an urgent need for a vaccine. As we move into Q3 we will continue to monitor these changing consumer demands and identify any strong investment opportunities. Over this past month, we have been monitoring the volatility of the markets as well as the uncertainty in the economy. As such, we have maintained a cautious approach back into equity allocations for our portfolios. Our findings led to the decision that investing in AZN, MRNA and WELL Health will create value as we move into the middle of Q3. Additionally, we have also invested in LULU and SHOP, two companies that have shown resilience and strength during these unprecedented times.
As your trusted Portfolio Managers, Caerus Private Wealth and its team are available to address any questions you may have. Stay safe!
Terry Fay, Director, Private Client Group, Portfolio Manager
Kian Ghanei, Director, Private Client Group, Portfolio Manager
Caerus Private Wealth – HollisWealth, a division of Industrial Alliance Securities Inc.
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terry@caeruswealth.ca | kian@caeruswealth.ca
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This information has been prepared by Terry Fay and Kian Ghanei who are Portfolio Managers for HollisWealth® and does not necessarily reflect the opinion of HollisWealth. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. Terry Fay and Kian Ghanei can open accounts only in provinces in which they are registered. HollisWealth® is a division of Industrial Alliance Securities Inc., a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.