Holly Black: Welcome to Morningstar. I'm Holly Black. With me is Alex Morozov. He is Head of Equity Research at Morningstar. Hello.

Alex Morozov: Hello, Holly.

Black: So, I think in the last couple of months one sector that's really been in the spotlight is the one that is racing to find a cure for this coronavirus pandemic. Is this an area you are looking at particularly?

Morozov: Yeah. So, as a part of my coverage universe, I cover quite a few life science and medical technology firms that are directly or indirectly involved with the development of either a test for Covid-19 or potentially a vaccine. And as you said, the sector has been quite hot. So, if you look at the prior two pandemics where the stock universe was and where it was right immediately after, healthcare sector as a whole did pretty well but the life science segment of that has done particularly well. Some of the stocks that I cover are actually trading at levels above where they were back in February-March. And that's really primarily driven by those companies that are more positively affected by the coronavirus.

Black: And I think one of the crazy things about this is that we don't even know if they are going to be able to create a cure and yet their share prices are going up just on that hope. And we're seeing these companies working ways that they've never worked before developing vaccines before they even know if they work or developing them at crazy speed than ever before. So, how should investors be thinking about this sector?

Morozov: Well, the interesting thing about the life science sector is, think for example going to 19th century California gold rush. So, all the folks were running to California trying to benefit from all the gold that was found there. So, interestingly enough, the companies that benefited the most from that gold rush, not necessarily the ones that traded in gold or benefited from some of those pioneers finding gold. The companies that did best are the ones that were manufacturing picks and shovels.

So, the way I look at the coronavirus and the potential vaccine is, you can bet on perhaps on a vaccine manufacturer if you'd like. Or perhaps, what you can do is, just take a look at the companies that are going to benefit regardless of who actually develops that vaccine. So, you look at within my coverage universe a company Thermo Fisher Scientific. This is a company that is on the forefront right now of manufacturing tests for Covid but it's also probably going to be a beneficiary of likely vaccine once it developed. The same goes for a company like Becton, Dickinson. The company actually manufacturers vials. And the vials are fairly basic commoditized product but every vaccine will need a vial to be sold in. So, looking at the companies that manufacture those picks and shovels is probably the best way to find the winners in this space.

Black: And with the share prices one of the few areas that have gone up since the outbreak of the disease. Does that mean there are really any good value investment opportunities at the moment?

Morozov: Yeah, it's a little bit more challenging to find great ideas right now in healthcare space as a whole but particularly among any companies in the life science space. Most of the life science sector actually trades above our fair value estimate. Maybe the lone exception here is Roche. Roche is a conglomerate. So, it's not necessarily a pure-play life science firm. It's got a very sizable drug segment, but it also does have a fairly big diagnostic segment. So, the diagnostic segment or Roche has potentially significant tailwinds from both the test volume that we are going to see over the next 6 to 12 months as well as a potential antibody test as well as the potential vaccine. So, Roche is actually trading at material discount to our fair value estimate. So, it's probably one of the few ideas that we have in this space.

Alex, thank you so much for your time. For Morningstar, I'm Holly Black.