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Soros Is Betting On Healthcare & Technology, Should You?
Aspire, Thought Leaders | 30 January 2015
By: Lim Si Jie
Articles (169) Profile

The Direxion iBillionaire Index ETF (IBLN) is one of several “guru-following strategies” competing in the ETFs market. Just imagine IBLN as a portfolio of stocks that “masters of the universe” like George Soros, Julian Robertson or John Paulson are accumulating.

Healthcare Picks
Interestingly, billionaires like Soros and Paulson are acquiring shares in the healthcare sector as data signals that governments are constantly increasing their spending on healthcare. This does not come as a surprise given that the world continues its shift towards an ageing population.

Back in Singapore, we see that government expenditure on healthcare has grown steadily in the past few FYs.

Source: Singapore Ministry of Health

Raffles Medical Health

Source: Reuters

Raffles Medical has strong margins that give investors’ confidence in its business operations. Both its trailing twelve months and five year average margins continues to fare above the industry and sector average. It gives investors a good gauge of its comparative advantage as a healthcare provider.

Technology Picks

Source: eMarketer

Smartphone usage will continue to pick up as 3G and 4G networks advance and as smartphones become more affordable. New users in the developing regions of the Asia-Pacific region, the Middle East, and Africa will drive usage of smartphones worldwide.

The outlook for the sector looks promising given that there is a healthy growing demand. What is safer than taking a bet for technology stocks? The only worry weighing on investors’ minds would be the relative valuation of technology stocks.

Low P/E Ratio
Given the hype over technological stocks, we would think that they are overbought and overpriced in current market conditions. However, a closer analysis of technology companies using the PE ratio as a yardstick would yield a much different result.

The lack of technology stocks in the local market is a hindrance to investing in technology stocks. There are, however, fair valued technology stocks in the region as well as in the US market.

Even Credit Suisse agrees that Tencent Holdings fits perfectly to the bill of a fair valued technology stock.

Microsoft and Apple
Technology giants such as Microsoft and Apple are surprisingly fair valued as well. The PE ratio of Microsoft (MSFT) of 16.86 in 2014 is relatively fair valued with forward estimates of growing earnings in the next three years.

Source: NASDAQ, chart on Microsoft's current PE and forecast PE

Even the PE ratio of Apple (AAPL), a hyped up stock given its market positioning, is fairly priced at 17.44 times of its 2014 earnings. Just like Microsoft, forward estimates for Apple looks positive.

Source: NASDAQ, chart on Apple's current PE and forecasted PE

What To Avoid: Financials
The recent Swiss National Bank (SNB) decision to unpeg CHF against EUR is still sending shivers down the spines of the market. European Central Bank’s (ECB) decision to stimulate the economy with its own Quantitative Easing (QE) is creating ripple effects in the financial market and especially in the financial stocks.

With the jittery market conditions, financial stocks seem to be the last few sectors that even guru investors are looking at.

Keeping An Open Mind
Although investing should be done with your own due diligence, it is always wise to keep the views of billionaires as a “useful starting point for further research”. After all, they did make their fortunes by being good at what they do: Investing.

Si Jie is no stranger to investing having started his journey at a young age. He is heavily influenced by acclaimed investors such as Benjamin Graham, Peter Lynch, and John Rothchild.

Please click here for more information about this author.

Join The Conversation
The Shares Investment editorial team welcomes constructive feedback on our coverage and content. We would also be delighted to answer any questions on the above article. Leave us a comment below, and we'll get back to you shortly!

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