Cardinal Update – May 2021

Steady as She Goes in Healthcare – Healthcare companies outperformed the broader index early on in the pandemic as there was a flight to safety. Since then, we have seen the technology sector and cyclical sectors such as financials and industrials significantly outperform, while healthcare has lagged. Healthcare is one of the few sectors not trading at an elevated valuation today, despite solid earnings growth and strong upcoming catalysts. The pandemic has caused the deferral of physician visits which in turn has led to fewer procedures and reduced screening for diseases. As we return to a more normal state, revenue and earnings growth should accelerate and companies such as Merck, Gilead Sciences, and Becton Dickinson will all be better off. Still, all of these names trade at attractive valuations relative to their historical ranges, peers, and the overall market.

COMPANY FOCUS: ENEL SPA – Enel Spa (Enel) is the largest European utility with a market capitalization of 83B
EUR and pays a dividend yielding 4.4%.

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