I have posted my views on pharma sector in Ranvir’s portfolio thread.
Regarding valuations being expensive in the pharma sector,
In the bigger companies like sun, lupin, drl etc there are so many moving parts to the business with lot of geographies covered by the companies in question. Hence it might be difficult to do a detailed check on valuations.
Earlier I had a preference for domestic facing pharma companies like jb chem, ipca etc. But now it seems situation has changed somewhat and these domestic facing companies will face some problems with prescriptions of doctors drying up due to low patient visits to hospitals amid the viral scare.
But because of the factors mentioned in the post link to which is given above namely
Faster USFDA issue resolutions, faster anda approvals, strong dollar, continuing production inspite of lockdown, and the all important strength exhibited by most stocks on price parameter. Besides the chances of usfda audit problems are lower because of travel restrictions, and hence at least for next few months, companies in the sector are likely to face less thread of related issues.
Coming to my preferences, I now am in favour of companies which have a very strong base US business which is getting stronger. I also like companies which are well placed in the API space and which seem to be posting decent numbers since past few quarters and there is promise of growth and profitability improving.
Coming to companies quoting at very high valuation like abbott, divis etc, I am avoiding precisely because of the kind of valuations these companies are quoting at. I like companies like alembic, cipla, biocon, laurus, aarti drugs etc and am invested in them. I also am keeping the frontline stocks like sun, lupin, dr, cadila etc on my watchlist as I see the pharma index likely to outperform going ahead and companies like sun (21% weightage), drl (10-11% weightage), cadiila lupin etc have high weightage to the index.
@Mukundks, I dont track lux, you can reach out to someone who is tracking the thread closely and responding there.
@Hemant_Dujari I dont track polycab.
@Vivek_6954 These packages etc in the longer run dont mean much. These create excitement in the markets for a few days and then its business as usual. I prefer to focus on companies’ own strength rather than be swayed by macros, unless the macro is really affecting/changing the business model of the company. Case in point being financials of all forms which can be impacted by corona majorly and hence instead of trying to find winners there, I prefer to look elsewhere.