Sell-Off Amid Healthcare Partnership Talk Is Overdone

Vishnu Lekraj: With the announcement today of Amazon, JP Morgan, and Berkshire Hathaway forming a potential healthcare behemoth, many of the healthcare services firms have sold off over the course of this morning. However, we believe the sell-off is overdone.

In the past, many major corporations have tried partnerships in order to bring healthcare costs down. However, because their core competency is not healthcare and because this is a very dynamic and a very complex space, they haven't been as successful as what some industry analysts have believed. In addition, we believe the buying power of a combined trio of JP Morgan, Berkshire Hathaway, and Amazon will pale in comparison to what the healthcare services firms have built over the past several decades.

We believe, again, the sell-off here for many of these stocks is overdone. The moats for these companies, the wide moats for the PBMs and the narrow moats for the MCOs are still intact and will continue to allow these companies to produce significant competitive advantages and economic profitability over the next several decades.