October 23, 2025 • 4 mins
'Quality stocks' such as healthcare companies are trading at their cheapest level relative to the market in decades.
This is taking place while market concentration is at record levels.
Sam Dickie from Fisher Funds explained further.
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Speaker 1 (00:00):
Now, quality stocks like healthcare companies are trading at their
cheapest level relative to the market in decades, and that's
happening while market concentration is at record levels. Sam Dickey
from Fisher Funds is looking into this and is with us.
Hi Sam, Hey, Sam, Before we get into it, have
you managed to get out of Palmerston North?
Speaker 2 (00:17):
Not? You can't associate everything in the Central North Island
with Palms North. That was New Plumber. Actually, you know,
I did get out of there.
Speaker 1 (00:24):
It's a lot hours, a lot better. But hold on,
were you waiting for nine hours? Yes? Oh mate? What
time do you get out?
Speaker 2 (00:33):
We we got out of there about three thirty four o'clock.
Oh yeah, it wasn't it.
Speaker 1 (00:37):
Oh I'm pleased that you need to get out though.
Speaker 2 (00:39):
Hey. By the way, but I love Naki the naki though,
so I was very happy to be there for that
extra time.
Speaker 1 (00:43):
Isn't it like if you're going to be trapped in
a small rural town. Well, when I say small, it's
a small rural city. New Plymbers will be one of
the ones that you'd be quite happy to be trapped
in because they've got a great hotel. That's the nice hotel,
and then all these wonderful places to eat.
Speaker 2 (00:56):
Ay, that's one number one.
Speaker 1 (00:58):
Yep, did you stay at the nice hotel?
Speaker 2 (01:01):
Ah? No, but it's just on number one region in
the country.
Speaker 1 (01:05):
I totally agree with you. Anyway, Listen to the important stuff.
When you say that these quality stocks are cheap, What
do you mean by that?
Speaker 2 (01:11):
Yes, probably best to give you just a couple of factoids.
So the last six months in the US, companies making
no profits or losses are up about forty percent, and
companies that actually make a profit, which is typically a
pretty key threshold for being a quality company, a barely
up ten percent. And if you broaden out that measure
of quality to things like strong balance sheets, ability to
(01:33):
convert any profits you do get into cash pretty easily,
and just all around good corporate governance, the difference is
even more stark. So low quality companies have outperformed high
quality by forty percent in the last six months. And
that's the most extreme move we've seen in thirty years.
So this dash for trash, as the market calls it,
has left quality companies behind and left them looking very attractive.
Speaker 1 (01:54):
Why is healthcare so unloved right now?
Speaker 2 (01:57):
Yes? Well, you and I talked about this back in July,
and very quickly. US overall debt levels are about one
hundred and twenty PvE percent of GDP, and the US
healthcare expenditure is a key component of that. So the
US spends about twice the OECD average. And remember that's
about five trillion dollars, and about a trillion of that
is wasted on administrative bloat and unnecessary complexity. And the
(02:19):
Trump administration rightly so it was trying to crack down
on some of that wastage and the very high drug
prices the US charges, and that's caught up all of healthcare.
And it's wake not just the companies that are part
of the problem, like farmer companies that charge high drug
prices or administrative companies that are part of that bloat,
but in some cases the companies that are part of
the solution as well, those those companies that have products
(02:41):
that cut costs and shortened hospitals to stay. So that's
that's allowing the sort of the opportunity there at the moment.
Speaker 1 (02:47):
One of the facts that you've thrown at me, which
I find quite alarming, is that forty percent of the
US market value is in ten stocks. Now, how risky
is that for passive investors?
Speaker 2 (02:55):
Yes, forty and ten stocks, thirty percent and five. And
we know that that the AI boom has driven investors,
at least initially towards the MAG seven. The MAG seven
accounts for seventy five percent of market returns, eighty five
percent of the growth and profits, and ninety five percent
of the growth and capital expenditure in the US at
the moment. So that's all the expenditure going on data centers.
(03:18):
So you compare that with so that's the highest ever
I guess going back two hundred years that forty percent,
and the dot com boom that number was barely thirty percent.
So if you invested in a passive fund that replicates
the US stock market and you're hoping to get a
diversified exposure to five hundred companies, you could be in
for a rude shop because if anything goes wrong with
(03:38):
one or two, or god for bit, a handful of
those huge AI focused companies, you won't be getting a
diversified sort of passive exposure at all.
Speaker 1 (03:46):
What does all of this mean for investors more broadly, Well.
Speaker 2 (03:50):
I think all these issues were interrelated. So the AI
boom meant these megacat companies with the prime beneficiaries, initially
because they were the only ones that could afford the
massive infrastructure spin you and I have spoken about a
few times, and then more recently this FOMO has risen
and the market's got on frothy. Investors have been chasing
lower and lower quality companies, for example, tech companies that
say they do AI with no profit, and as a corollary,
(04:12):
typically high quality companies like healthcare and many others have
not only been left behind, they've actually been sold down
as a funding source for the foray into risky and
risky of tech. So if you're an active stock picker,
the opposite of a passive investor, there are some pretty
exciting opportunities around.
Speaker 1 (04:29):
Sam. It's good to talk to you, and it's good
to have you back in Auckland, Sam Dickey of Fisher Funds.
Speaker 2 (04:33):
For more from Heather Duplessy Allen Drive, listen live to
news talks the'd be from four pm weekdays, or follow
the podcast on iHeartRadio.
Now, quality stocks like healthcare companies are trading at their
cheapest level relative to the market in decades, and that's
happening while market concentration is at record levels. Sam Dickey
from Fisher Funds is looking into this and is with us.
Hi Sam, Hey, Sam, Before we get into it, have
you managed to get out of Palmerston North?
Speaker 2 (00:17):
Not? You can't associate everything in the Central North Island
with Palms North. That was New Plumber. Actually, you know,
I did get out of there.
Speaker 1 (00:24):
It's a lot hours, a lot better. But hold on,
were you waiting for nine hours? Yes? Oh mate? What
time do you get out?
Speaker 2 (00:33):
We we got out of there about three thirty four o'clock.
Oh yeah, it wasn't it.
Speaker 1 (00:37):
Oh I'm pleased that you need to get out though.
Speaker 2 (00:39):
Hey. By the way, but I love Naki the naki though,
so I was very happy to be there for that
extra time.
Speaker 1 (00:43):
Isn't it like if you're going to be trapped in
a small rural town. Well, when I say small, it's
a small rural city. New Plymbers will be one of
the ones that you'd be quite happy to be trapped
in because they've got a great hotel. That's the nice hotel,
and then all these wonderful places to eat.
Speaker 2 (00:56):
Ay, that's one number one.
Speaker 1 (00:58):
Yep, did you stay at the nice hotel?
Speaker 2 (01:01):
Ah? No, but it's just on number one region in
the country.
Speaker 1 (01:05):
I totally agree with you. Anyway, Listen to the important stuff.
When you say that these quality stocks are cheap, What
do you mean by that?
Speaker 2 (01:11):
Yes, probably best to give you just a couple of factoids.
So the last six months in the US, companies making
no profits or losses are up about forty percent, and
companies that actually make a profit, which is typically a
pretty key threshold for being a quality company, a barely
up ten percent. And if you broaden out that measure
of quality to things like strong balance sheets, ability to
(01:33):
convert any profits you do get into cash pretty easily,
and just all around good corporate governance, the difference is
even more stark. So low quality companies have outperformed high
quality by forty percent in the last six months. And
that's the most extreme move we've seen in thirty years.
So this dash for trash, as the market calls it,
has left quality companies behind and left them looking very attractive.
Speaker 1 (01:54):
Why is healthcare so unloved right now?
Speaker 2 (01:57):
Yes? Well, you and I talked about this back in July,
and very quickly. US overall debt levels are about one
hundred and twenty PvE percent of GDP, and the US
healthcare expenditure is a key component of that. So the
US spends about twice the OECD average. And remember that's
about five trillion dollars, and about a trillion of that
is wasted on administrative bloat and unnecessary complexity. And the
(02:19):
Trump administration rightly so it was trying to crack down
on some of that wastage and the very high drug
prices the US charges, and that's caught up all of healthcare.
And it's wake not just the companies that are part
of the problem, like farmer companies that charge high drug
prices or administrative companies that are part of that bloat,
but in some cases the companies that are part of
the solution as well, those those companies that have products
(02:41):
that cut costs and shortened hospitals to stay. So that's
that's allowing the sort of the opportunity there at the moment.
Speaker 1 (02:47):
One of the facts that you've thrown at me, which
I find quite alarming, is that forty percent of the
US market value is in ten stocks. Now, how risky
is that for passive investors?
Speaker 2 (02:55):
Yes, forty and ten stocks, thirty percent and five. And
we know that that the AI boom has driven investors,
at least initially towards the MAG seven. The MAG seven
accounts for seventy five percent of market returns, eighty five
percent of the growth and profits, and ninety five percent
of the growth and capital expenditure in the US at
the moment. So that's all the expenditure going on data centers.
(03:18):
So you compare that with so that's the highest ever
I guess going back two hundred years that forty percent,
and the dot com boom that number was barely thirty percent.
So if you invested in a passive fund that replicates
the US stock market and you're hoping to get a
diversified exposure to five hundred companies, you could be in
for a rude shop because if anything goes wrong with
(03:38):
one or two, or god for bit, a handful of
those huge AI focused companies, you won't be getting a
diversified sort of passive exposure at all.
Speaker 1 (03:46):
What does all of this mean for investors more broadly, Well.
Speaker 2 (03:50):
I think all these issues were interrelated. So the AI
boom meant these megacat companies with the prime beneficiaries, initially
because they were the only ones that could afford the
massive infrastructure spin you and I have spoken about a
few times, and then more recently this FOMO has risen
and the market's got on frothy. Investors have been chasing
lower and lower quality companies, for example, tech companies that
say they do AI with no profit, and as a corollary,
(04:12):
typically high quality companies like healthcare and many others have
not only been left behind, they've actually been sold down
as a funding source for the foray into risky and
risky of tech. So if you're an active stock picker,
the opposite of a passive investor, there are some pretty
exciting opportunities around.
Speaker 1 (04:29):
Sam. It's good to talk to you, and it's good
to have you back in Auckland, Sam Dickey of Fisher Funds.
Speaker 2 (04:33):
For more from Heather Duplessy Allen Drive, listen live to
news talks the'd be from four pm weekdays, or follow
the podcast on iHeartRadio.
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