WHO: Sunaina Murthy, analyst at AIM's Global Healthcare Fund, is part of a two-member team responsible for managing close to $1 billion in assets. Prior to AIM, Murthy worked with Burrill & Company, a biotech venture capital firm. She holds a master's in biotechnology from Northwestern University, and was involved in cancer research at University of Pennsylvania, prior to her entry into the finance industry.
STRATEGY: Murthy takes a bottoms-up approach to her investing strategy. She does research into the field itself,before evincing interest in a company. “I make it a point to speak to a company’s customers and try to use independent research firms to study a company’s potential. We look for companies that have strong fundamentals and have the potential to beat earnings expectations. In the biotech industry, however, many companies don’t actually make money. We use other multiples, such as multiples of cash, combined with strong fundamentals to arrive at our investment thesis,” says Murthy. In this volatile field,where a drug can make or break a company, Murthy seeks out companies that have stable product pipelines, strong patent protection, and management teams with a history of delivering above expectations. “We have diversified our portfolio across healthcare services, pharma, biotechnology and medical devices. Healthcare services have consistently delivered good results,” explains Murthy. Recently, she has looked at biotech companies with at least two years of cash reserve that trade below or near cash. “If the company has a broad platform that can be leveraged into products, it can be a good investment,” she says.
PORTFOLIO: About 80% of the portfolio is invested in the U.S. pharma and healthcare markets, the rest is in the European and Japanese markets. “About 50% of our investments are in the pharmaceutical sector, 25% in the hospitals and services, and the rest is split between biotech and devices.In the next two to five years, we see the pharma sector emerging as a good investment, as its product pipelines will mature, reducing the impact of its current exposure to generics, and it has potential to deliver value. Some of her winning picks have been Tenet, Pfizer/Pharmacia, Isis Pharmaceuticals, and Protein Design Labs.
ADVICE: Well-diversified mutual funds, with good track records, can provide the individual investor with a more balanced and less volatile equity portfolio rather than investing in individual stocks. “Sector funds can be a part of a diversified investment strategy, and healthcare is critical to life, which means the importance of this market won't go away,” says Murthy.