PRLD - Medical Stocks 2021 Outlook: 2 Strong Tailwinds Should Drive Favorable Performance

• In my 2020 outlook, which was pre-coronavirus, I argued the case for buying small and microcap medical stocks that were priced for "non-success". This approach worked in 2020.
• My 2020 themes were gene therapy, targeted oncologics, and less invasive surgery. For 2021, I add SARS CoV-2 vaccine "picks and shovels", lab testing companies, and specialized ophthalmology companies.
• There are two strong tailwinds, namely 6% average annual growth in US healthcare spending that I forecast through 2030 and that the second leg of the bull market has begun.
• During the last second leg of a bull market, which occurred in the 1980s, small and microcap stocks performed tremendously. As overvaluations were often arrived at, it was also a time for profitable short selling.
• I expect the next three years to represent a period of favorable returns for medical stocks, and I believe that there will be continued consolidation at generous takeover premiums.

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