Damien Conover: In the current market dynamics, we've got a lot of sectors that we think are overvalued, but within this dynamic we also are looking at the healthcare sector, most notably, the pharmaceutical industry, as being undervalued.
We think a lot of reasons are for increased concern about drug pricing reforms around drugs prices in the United States. We think these concerns are overblown. While there could be some new additional regulation around drug prices, we don't think there's going to be a major shift there.
One of the ways the pharmaceutical firms are fighting back against potential pricing reforms is to really fight for new innovation. A couple of firms we like that are really well-positioned in innovation are Pfizer and Eli Lilly. First, with Pfizer. They are really pushing deep into oncology. That should be a good growth engine for them going forward.
Secondly, with Eli Lilly, they are very well-positioned in immunology. Areas like psoriasis, areas where the body is not taking on the disease in the right way, this firm is to bring in the next generation of drugs and they have very strong pricing power and will likely get strong market penetration.
Within this context of drug pricing reforms, we really like firms that have innovation. Eli Lilly and Pfizer are well-positioned, both from valuation and strategically, to bring out these drugs that should have strong pricing power.