2 stocks- 2 different ideas: Arrowhead pharma & Boston Scientific

We are looking at two healthcare related stocks. Both of them in our view are very high quality. Arrowhead pharma is a biotechnology company which is involvedin RNA therapeutics which is the future of medicine. Boston Scientific is a growth company which produces medical equipment and is exposed to the demographics of an Ageing population. Now this is where market mispricing from Passive investing happens. One miss by boston scientific in the first half has lead to a near 50% decline in the stock. This is because once the stock starts to fall relative to the overall index, there is systematic selling of the stocks by funds run by bots. Also the passive investing exaggerates this by allocating less money to stocks that are falling.

Here in lies the opportunity as when a stock becomes over extended on the downside, that it provides an attractive entry point for patient investors. Here Muffett’s healthcare background comes as an advantage as he knows that Boston scientific underlying business model and the equipment that they are making are doing good. So this mispricing could be taken advantage off. We are not saying that this will be the bottom. But we are very close and also in the next 6 months to 2 years Boston scientific would be trading a minimum 50% higher.

In Muffett’s own personal portfolio, we have nearly 20% exposure to Boston scientific. we are not advocating this to others but the reason we are saying is our conviction. We do not know if there are any problems within the company that other people know about and selling. However we had 2 Boston scientific directors buy shares abound $56. So it is safe to assume that the price falls is mostly due to passive investing distortion.

The market is currently pricing Arrowhead for rapid growth as more of their drugs come to the market. The platform has been validated by plosaziran. We will also get results from olpasiran which is licensed to Amgen. They will replace many of the therapeutic indications for metabolic disease in the future. Thats why we believe that Arrowhead will 10 times may be 5 times now as it has already risen a lot.

So here is the growth in revenue of boston scientific. This is quite impressive and although growth is expected to slow, it will continue to grow as both China and India with massive populations age. They have innovative therapies and they are also a venture fund investing in more than 30 small companies. So we see a huge opportunity in Boston scientific.

Many of Boston Scientific procedures are innovative and minimally invasive which is overall better than the invasive procedures. In the future more and more minimally invasive procedures will be done as advances in fibreoptics and other improvements will enable more procedures to be done as minimally invasive.

Analysis done in good faith and are our own views and not investment advice.

May the peace of the Lord be upon you.