European health-care companies have a special advantage in the U.S. — high prices for their products and services. Nicole Kornitzer, a portfolio manager of the Buffalo International Fund, discussed broad health-care trends and named three European companies well-positioned to benefit from them.
Kornitzer has been a co-manager of the Buffalo International Fund
with her cousin Bill Kornitzer since 2009. She is based in Paris. Kornitzer Capital Management of Mission, Kan., has about $7 billion in assets under management and is the investment adviser for the Buffalo Funds.
The Buffalo International Fund has a four-star rating from Morningstar (the second highest). It typically holds shares of 65 to 85 companies outside the U.S.
During an interview, Kornitzer described a top-down strategy through which she and her colleagues identify “20 to 25 secular growth trends” they expect to continue for at least three to five years. This is followed by bottom-up analysis of fundamentals, including unit sales growth, “strong and expanding margins,” cash-flow growth, and low levels of debt.
All of this has led to a portfolio that leans away from cyclical industries and commodities, and toward consumer discretionary and staples, technology, and health care.
Kornitzer stressed that she also looks to buy or add to positions at “reasonable prices,” while trimming or selling positions when they are trading too high in their peer groups.
That may not appear to be a radical management strategy, but it has led to significant outperformance against the fund’s benchmark, the MSCI All Countries Index ex U.S. in U.S. dollars
and its Morningstar category, as you can see below.
Kornitzer cited two main health-care trends driving her stock selection in the industry: cost containment and increasing consumption as the middle class quickly expands in developing countries and as populations age. She worked as a health-care analyst before becoming a portfolio manager.
Kornitzer named three European companies benefiting from these trends. All have significant sales in the U.S. and enjoy greater profit margins there, because of the higher prices they can charge. This means there is an obvious threat from efforts to bring down health-care prices.
”The concern about health-care pricing is not limited to U.S. companies, it is a concern for all companies around the world that sell in the U.S. market,” Kornitzer said.
How long might it take for U.S. prices to come down significantly relative to other markets? Answering that question would require a crystal ball. But the need for large health industry players around the world to develop lower-cost products and services is obvious.
is based in Germany but derived 41% of its 2018 sales in the U.S., according to Kornitzer. It manufactures generic injectable drugs — a rapidly increasing product category because of increasing prevalence of diabetes, as well as the increase in health-care access and hospital construction in emerging markets.
Fresenius SE also holds half of Fresenius Medical Care AG
which is a provider of dialysis services in the U.S. In addition to the above, Fresenius SE also manages hospitals in Europe and Latin America.
In the injectable business and in the hospitals, Fresenius is focused on efficiency improvements, according to Kornitzer. She called the company “complicated,” but also “well managed.”
She also said the shares trade at “pretty low multiples” to competitors. The holding company’s shares trade for 13.6 times the consensus earnings estimate for the next 12 months, among analysts polled by FactSet. To put that valuation into some perspective, the S&P 500 Index
has a weighted aggregate forward price-to-earnings ratio of 16.8, and the S&P 500 health care sector’s forward P/E ratio is 15.5.
Analysts polled by FactSet expect the holding company’s sales to increase 5.2% this year, followed by increases of 6.9% in 2020 and 6.1% in 2021. Analysts expect net income to decline 7.7% this year, but then to increase 7.8% in 2020 and to increase another 8.6% in 2021.
is based in Barcelona, Spain. The company provides plasma-therapy products and is benefiting “from trends in demographics such as aging of the population and population growth that drive use of immunoglobulin, which is their largest product,” Kornitzer said. During 2018, 66% of the company’s sales were in the U.S.
Immunoglobulin therapy is used to treat immune deficiency.
Kornitzer said: “It is really quite an interesting business because of aging and the increasing incidence of chronic diseases.”
A major part of the company’s business is the collection of blood donations for plasma, which is a different process from ordinary blood donation. This collection work and the fractionating of plasma require “a very strong attention to detail” and the plasma-therapy products require “a perfect manufacturing process,” which contribute to very high barriers for potential competitors, Kornitzer said.
She described an oligopoly, in which Grifols competes with CSL Ltd.
and Shire, which was acquired by Takeda
Kornitzer said that for Grifols, improved profit margins have been “slow to come,” which is why the stock “trades at much lower multiples than its peers.” American depositary receipts (ADRs) of Grifols trade for 15.8 times the consensus earnings estimate for the next 12 months among analysts polled by FactSet, compared with a forward multiple of 32.9 for CSL. (A forward price-to-earnings ratio is not yet available for Takeda).
If Grifols “can get their margins to improve, with analysts’ estimates being revised upwards rather than downward, the stock can do quite a bit better,” Kornitzer said.
Analysts expect the company’s sales to increase 10% this year, followed by increases of 7% both in 2020 and 2021. The analysts expect earnings per share for Grifols’ ADRs to increase from $1.09 in 2018 to $1.16 in 2019 and then to $1.34 in 2020 and $1.52 in 2021.
Sartorius Stedim Biotech
of France supplies equipment used to manufacture biologic drugs, which are medications synthesized from biological sources. Kornitzer said about 35% of the company’s sales during 2018 were in the U.S.
“The company is involved primarily in single-use technology. It sounds like an ecological disaster but it is probably better for the environment because it uses less water and produces less waste,” she said, adding that the overall market is moving more toward single-use products.
But she still feels good about Sartorius Stedim because “biosimilars are making headway in Europe. They have not in the U.S. but they are coming.” And new market entrants will need the type of equipment Sartorius provides.
The company competes with Thermo Fisher Scientific
which expects to complete its $21.4 billion deal to acquire General Electric’s
iopharma business during the fourth quarter.
“Sartorius is not a cheap stock any more,” Kornitzer said. The shares trade for 48.2 times the consensus earnings estimate for the next 12 months. So the Buffalo International Fund is not adding to its position now, she said. The fund took advantage of a decline in the share price in 2017, when the company lowered its guidance because of several operational problems.
Analysts expect the company’s sales this year to rise by 11.8%, followed by increases of 11.1% in 2020 and 12.2% in 2021. Net income is expected by analysts to increase by 15.9% this year, followed by increases of 12% in 2020 and 15.9% in 2021.
Here are the fund’s top 10 holdings (out of 81) as of March 31:
Most of the shares held by the fund are listed in the countries where the companies are domiciled, however, some are listed directly on the New York Stock Exchange and some are American depositary receipts (ADRs). If there is an ADR available for the company that isn’t held by the fund, that ticker is included in the “ADR” column.
The Buffalo International Fund has $378 million in assets and an annual expense ratio of 1.05%, which Morningstar considers “average.”
Here are average annual returns for the fund for various periods against the MSCI All Countries Index ex U.S. in U.S. dollars
and against the fund’s Morningstar category:
Don’t miss: Dividend stocks may get even hotter thanks to the Federal Reserve
Create an email alert for Philip van Doorn’s Deep Dive columns here.
Philip van Doorn covers various investment and industry topics. He has previously worked as a senior analyst at TheStreet.com. He also has experience in community banking and as a credit analyst at the Federal Home Loan Bank of New York.
欧洲的医疗保健公司在美国有一个特殊的优势——他们的产品和服务的高价格。布法罗国际基金的投资组合经理 Nicole Kornitzer 讨论了广泛的医疗保健趋势，并列举了三家有能力从这些趋势中获益的欧洲公司。
与她的表妹比尔·科尼策自2009年起。她住在巴黎。堪萨斯州特派团 Kornitzer 资本管理公司。他是布法罗基金的投资顾问。
水牛国际基金（ BuffaloInternationalFund ）的评级为晨星（ Morningstar ，第二高）。它通常持有美国以外65至85家公司的股票。
在一次采访中， Kornitzer 描述了一种自上而下的战略，通过这种战略，她和她的同事确定了“20到25种长期增长趋势”，他们预计将持续至少三到五年。随后对基本面进行自下而上的分析，包括单位销售增长、“强劲且扩张的利润率”、现金流增长和低债务水平。
这似乎并不是一种激进的管理策略，但它已导致摩根士丹利资本国际所有国家指数（ MSCI All Country Index ，除美元外）相对于该基金基准指数的显著跑赢
FreseniusSE 还持有费森尤斯（Fresenius） Medical Care AG 的一半股权
该公司是美国透析服务的提供商。除上述业务外， FreseniusSE 还管理欧洲和拉丁美洲的医院。
据 Kornitzer 称，在注射业务和医院，费森尤斯（Fresenius）致力于提高效率。她称该公司“复杂”，但也“管理良好”。
她描述了一个寡头垄断，格里弗斯与 CSL 有限公司竞争。
Kornitzer 表示，对盖立复（Grifols）而言，利润率的提高“来得太慢”，这就是为什么该股“市盈率远低于同行”。FactSet 调查的分析师对盖立复（Grifols）未来12个月美国存托凭证( ADR )的预期市盈率为15.8倍，而 CSL 的预期市盈率为32.9倍。（武田（Takeda）尚不具备预期市盈率）。
分析师预计，该公司今年的销售额将增长10%，2020年和2021年将增长7%。分析师预计，盖立复（Grifols） ADR 的每股收益将从2018年的1.09美元增至2019年的1.16美元，然后在2020年增至1.34美元，2021年增至1.52美元。
但她仍然对 SartoriusStedim 感觉良好，因为“生物仿制药类似物在欧洲正在取得进展。他们不在美国，但他们来了。”新的市场参与者将需要 Sartorius 提供的设备类型。
该公司与 Thermo Fisher Scientific 竞争
第四季度 iopharma 业务。
“ Sartorius 不再是廉价股票，” Kornitzer 说。股价是未来12个月普遍预期收益的48.2倍。因此，布法罗国际基金目前没有增加其地位，她说。该基金利用了2017年股价下跌的机会，当时公司因几个运营问题下调了指引。
该基金持有的大部分股票都在公司注册地所在国上市，但有些股票直接在纽约证券交易所上市，有些是美国存托凭证( ADR )。如果基金不持有公司的 ADR ，则该股票计入“ ADR ”栏。
Philip van Doorn 涵盖了各种投资和行业主题。他曾在 TheStreet 担任高级分析师。com 。他在社区银行方面也有经验，在纽约联邦住房贷款银行担任信贷分析师。