Finding health care companies we believe can thrive in a post-COVID-19 environment

Telehealth, outpatient care and less-invasive procedures will continue to be on the rise.

History tells us that during periods of exogenously led market rotations and black swan events, there are always winners and losers. Identifying these opportunities is what motivates us today. We think the dislocation between fundamentals, valuation and investor sentiment has never been greater over the past decade than it is now.

The metamorphosis from a pre-COVID-19 to post-COVID-19 environment is already well underway, but the duration is yet to be determined. Our task as active fundamental managers is to navigate through turbulence and the unknown and focus our efforts to preserve assets while also being positioned for future growth.

The prospects for the health care sector today are dramatically different from what they were even several months ago, pre-COVID-19, when the sector was in a lose-lose scenario, caught between pressures from both political parties: pricing concerns by the Republicans and the “coverage for all” goals of the Democrats. The health care sector was in everyone’s crosshairs. But, in our view, the landscape has now changed dramatically for the positive.

US spending on health care, as a percentage of GDP, is expected to increase from 17%, currently, to 20% by the mid-2020s.1 The US spends nearly twice as much as the average OECD (Organization for Economic Co-operation and Development) country.1

Figure 1: Projected US health care expenditures as a percentage of GDP

Source: Centers for Medicare & Medicaid Services: National Health Expenditure Projections, 2018-2027. Forecast Summary and Selected Tables. (The report was released on February 19, 2019.)

Health care’s growing prominence

Health care has an increasing importance both in our portfolios and in the major stock indices because of several innovative growth trends. The sector currently represents 34% of the Russell 2000 Growth Index and 17% of the Russell Midcap Growth Index.2

The recent trends within health care have been focused on the client experience. These trends include delivering tailored and customized therapies and telehealth, transitioning from inpatient to outpatient treatments, performing less invasive medical procedures, digitizing information and managing post-COVID-19 needs (such as the return to performing elective surgeries at many hospitals).

We strive to identify these trends early and capitalize on them as they emerge. We believe a number of companies that the portfolio owns are well-positioned to address these changes and benefit from them.

  • West Pharmaceutical Services (with a $15-billion market capitalization) is leading global manufacturer of packaging components used in syringes and vials for injectable drugs. Because of highly regulated FDA quality standards for these products, West Pharmaceutical is the dominant supplier and enjoys high barriers to entry for other competitors. With what we consider to be top-notch management at the helm they have delivered strong, consistent revenue and earnings growth for many years.
  • Masimo Corp. (with a $13-billion market capitalization) is a direct beneficiary of the COVID-19 and post-COVID-19 world. Masimo is a global medical technology company that manufactures noninvasive patient monitoring devices, most commonly used to gauge pulse rate and oxygen levels. Its devices can be used locally (at hospitals, doctors’ offices, and urgent care facilities) as well as remotely by patients at home. A management team we believe is best in class has led to double-digit revenue growth and strong future growth prospects.
  • Veeva Systems, Inc. (with a $30-billion market capitalization) provides the health care industry with specific, cloud-based software solutions. Its solutions enable pharmaceutical and other life sciences companies to realize the benefits of modern cloud-based architectures and mobile applications, thereby allowing for information sharing and collaboration in patient-centric clinical trials.

Our investment approach remains unchanged. We seek to invest in premier mid-cap growth companies that demonstrate the potential for continued strong compounding growth, over a multi-year time horizon.

As of March 31, 2020, Invesco Oppenheimer Discovery Mid Cap Growth Fund had 1.5% of its assets invested in West Pharmaceutical Services, 1.8% in Masimo Corp, and 1.0% Veeva Systems.

Holdings are subject to change and are for illustrative purposes only and should not be construed as buy/sell recommendations.

The health care industry is subject to risk relating to government regulation, obsolescence caused by scientific advances and technological innovations.


  1. Source: Center for Medicare & Medicaid Services: National Health Expenditure Projections, 2018-2027. Forecast Summary and Selected Tables. (The report was released on February 19, 2019.)
  2. Source: FactSet Research Systems, as of 3/31/20

Important Information

Blog Header Image: Shannon Fagan / Getty

Index definitions:

The Russell 2000 Growth Index measures the performance of the small-cap growth segment of the US equity universe. It includes those Russell 2000 companies with higher price-to-value ratios and higher forecasted growth values.

The Russell Midcap Growth Index measures the performance of those Russell Midcap companies with higher price to book ratios and higher forecasted growth values.

An investment cannot be made into an index.

Derivatives may be more volatile and less liquid than traditional investments and are subject to market, interest rate, credit, leverage, counterparty and management risks. An investment in a derivative could be lose more than the cash amount invested.

In general, stock values fluctuate, sometimes widely, in response to activities specific to the company as well as general market, economic, and political conditions.

The risks of investing in securities of foreign issuers can induce fluctuations in foreign currencies, political and economic instability, and foreign taxation issues.

Stocks of medium-sized companies tend to be more vulnerable to adverse developments, may be more volatile, and may be illiquid or restricted as to resale.

The fund is subject to certain other risks. Please see the current prospectus for more information regarding the risks associated with investments in the fund.

Before investing, investors should carefully read the prospectus and/or summary prospectus and carefully consider the investment objectives, risks, charges and expenses. For this and more complete information about the fund(s), investors should ask their investment professional for a prospectus/summary prospectus or visit

The opinions expressed are those of the author as of June 8, 2020, are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.

This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial advisor/financial consultant before making any investment decisions. Invesco does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. Federal and state tax laws are complex and constantly changing. Investors should always consult their own legal or tax professional for information concerning their individual situation. The opinions expressed are those of the authors, are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.

Ronald Zibelli is Chief Investment Officer for Growth Equities and Senior Portfolio Manager for both the Invesco Oppenheimer Discovery Small Cap Growth and Invesco Oppenheimer Discovery Mid-Cap Growth strategies.

Mr. Zibelli joined Invesco when the firm combined with OppenheimerFunds in 2019. His tenure at OppenheimerFunds began with taking over the small-cap growth strategy in 2006, and his team expanded its capabilities with the launch of the mid-cap growth strategy in 2010. Prior to joining OppenheimerFunds, Mr. Zibelli was a managing director and the small-cap growth team leader at Merrill Lynch Investment Managers, where he was responsible for managing 11 portfolios, including the firm’s small-cap growth strategy. He began at Merrill Lynch Investment Managers in 2000. Before that, he spent over 11 years at Chase Manhattan Bank. In 1997, he was named portfolio manager for two Chase Vista small-cap strategies and managed both strategies until 1999.

Mr. Zibelli earned a BA degree in finance from Lehigh University. He is a Chartered Financial Analyst® (CFA) charterholder and member of the New York Society of Security Analysts.

Justin Livengood is a Senior Portfolio Manager for the Mid Cap Growth strategy. He also serves as Senior Research Analyst responsible for the health care, real estate, and financial services sectors for small- and mid-cap growth.

Mr. Livengood joined Invesco when the firm combined with OppenheimerFunds in 2019. Before joining OppenheimerFunds in 2006, Mr. Livengood was a vice president and fund analyst with Merrill Lynch Investment Managers, where he specialized in financial services, health care, energy, and basic materials. During his tenure at Merrill Lynch, he also worked as an investment banking analyst in the global media group and as an associate with Merrill Lynch Ventures.

Mr. Livengood earned a BS degree in business administration with a concentration in accounting and finance from Georgetown University and an MBA from Harvard Business School. He is a Chartered Financial Analyst® (CFA) charterholder.

Emanuele Bergagnini is a Senior Client Portfolio Manager for the Invesco Oppenheimer Main Street strategies and the Invesco Oppenheimer Small & Mid Cap Growth strategies.

Mr. Bergagnini joined Invesco when the firm combined with OppenheimerFunds in 2019. He began his career at OppenheimerFunds as a senior quantitative analyst responsible for quantitative research, technical analysis, derivatives, and portfolio risk analysis. Before joining OppenheimerFunds, he was a senior vice president at Windham Capital Management. Previously, Mr. Bergagnini was a senior vice president at Northern Trust Global Advisors in Canada.

Mr. Bergagnini earned a BA degree in economics and mathematics (statistics) from York University and an MBA from the Richard Ivey School of Business at the University of Western Ontario. He is a Chartered Financial Analyst® (CFA) charterholder and is a member of the Investment Management Consultants Association, the Association for Investment Management and Research, and the New York Society of Security Analysts.

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