In March the International Growth Fund fell -8.5%, underperforming the benchmark index which fell -4.6%. The exceptional US policy uncertainty around trade and Federal Government spending caused growth stocks to underperform value stocks by 5%.

UnitedHealth (+10%) was up amid some positive updates, following months of increased scrutiny and political uncertainty with the new Trump administration. The stock fell in February when reports surfaced of a Department of Justice (DOJ) probe investigating certain US health insurance practices. In March, the company won a favourable court ruling in relation to a 2017 DOJ investigation, with a special master ruling that the DOJ had not presented evidence to support its claims against UnitedHealth, easing concerns around the current case. Secondly, fear around sweeping healthcare cuts from the Trump administration softened as proposed reductions appear targeted at the Medicaid program for low-income earners. Medicaid accounts for around 5% of the company’s total profits. While political noise around healthcare is likely to persist for some time, health insurance companies like UnitedHealth continue to play a critical role in the US healthcare system.

Dexcom (-23%) shares stumbled this month, swept up in a broader sell-off of high-growth medical device companies (Intuitive Surgical was also down 14%). Two company-specific setbacks compounded the stock decline. First, the FDA issued a warning letter, flagging issues in manufacturing processes and quality management systems at certain Dexcom facilities. The company believes these issues are largely process orientated rather than product-related and expects minimal business disruption. The second challenge stems from the upcoming review for the pricing of continuous-glucose monitors (CGM’s) in the Medicare healthcare plans. While this sparked concern, we think the risk is limited. The scrutiny is on distributor margins which is not Dexcom’s own pricing, and data suggests the average CGM distributor margins are within with Medicare’s historic norms.