We all know the baby boom generation is getting older and when an individual gets older the body does not heal as fast as when it was younger. To help with healing drugs are used, those prescription drugs can be billion dollar sellers which makes pharma companies potentially attractive as a stock holding.

In an article by Danilo Masoni of Reuters, global health care stocks have not been this cheap in decades, which incites the fund companies to begin to buy, but the shares have not jump, highlighting the uncertainty over drug pricing policies since President Trump returned to the White House.

Global pharma companies’ earnings outlooks is being obscured by concerns over revived most-favored-nation drug pricing rules in the lucrative US market and potential 200% tariffs on pharma imports into the US.

During COVID 19 years, money flowed into pharma stocks, but since then the sector is cheap and unloved.

At 15.9 times forward earnings, health care trades 11% below its long-term average and 20% below global equities, its steepest discount in 16 years.

Stephanie Aliaga, global market strategist at JPMorgan Asset Management in New York, said there is a good reason for the discount, US policy risks.

On the positive side, innovation is accelerating, pipelines are maturing and M&A is showing signs of picking up- yet stock prices are unmoved.

Is this a value trap or buying opportunity?

Historically, health care has traded at a modest premium to world stocks, thanks to its defensive profile and steady earnings.

Eddie Yoon, health care sector leader and portfolio manager at Fidelity in Boston, said Being cheap is not necessarily a reason to buy. You need a catalyst.

Linking to dividend paying stocks, what is the catalyst? sometimes the catalyst is the dividend yield, a profitable stock at a lower price paying a dividend and because the stock price is low, the yield goes up. At some point, the price should go up, but in the meantime getting a good yield is a wonderful thing.

There are more questions than answers, till the next time – to raising questions.