November 10, 2022

The neverending healthcare struggle: The Merck Group

The neverending healthcare struggle: The Merck Group

Here at Obermatt, we love when we receive our personalized Top 10 lists, as we know they are custom tailored by our analysts for us and our Premium users. This week, we got the German speaking Europe list.

Right away, we see a lot of well-known names, but one name stood out in our mind and that’s a German science and technology company, The Merck Group. Why do we think they can be a good weekly stock pick? In times of the never-ending pandemic and constant health struggles, a company dealing with healthcare technology, especially one that’s helping create new vaccine types is a must have. They also produce parts for digital lifestyle products like wearables, which are more and more present in our everyday lives.

When we look at the funds they invest in research and advanced labs, as well as employee training, we are even more certain we want to further analyze the company.

PRO: The following three points speak for a buy:

  1. Good Obermatt ranks except for Safety. Value is extremely positive, which means they are pretty cheap for the industry. Do note that the industry itself isn’t cheap and that the company’s value is ranked against its peers at Obermatt.
  2. Well diversified across several industries, ranging from healthcare solutions all the way to special materials and semiconductors.
  3. Together with several partners, they have a plan to reduce the pollution and emissions in healthcare. Also, they are developing the technology for a new cancer vaccine, which we think is important and may be groundbreaking.

CONTRA: The following three points argue against it:

  1. Low Safety Rank, which is due to low Leverage Rank of 34. This is somewhat normal across the industry. If the company has good debt management and growth perspectives, this doesn’t mean it isn’t safe.
  2. Their semiconductor business is heavily exposed to China. On top of existing semiconductor plants Merck operates in China, they are now building a production hub there and plan to invest another $150 million into it.
  3. Pharmaceuticals and healthcare technology companies are an expensive industry to invest into, which means you may not get the desired returns right away.

In our opinion, the pro points outweigh the cons in the case of The Merck Group and we decide we want it in our Obermatt Wikifolio.

Make sure not to miss the Obermatt Premium features, like our personalized Top 10 lists, as well as all of Obermatt’s latest research available earlier.

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