Where Evidence Meets Opportunity | February 2026

Healthcare Investing in a More Discerning Market Environment

Written by: David Mandelbaum, Portfolio Manager

Key Takeaways This Month

• AI-driven repricing became the dominant market development in February, spreading from software to logistics, real estate, and financial intermediaries in a rolling wave of disruption-related volatility.
• Geopolitical tension and isolated private credit stress amplified risk sensitivity, reinforcing the market’s focus on leverage, liquidity, and structural vulnerability.
• Big Tech earnings remained solid, but massive AI capex is no longer being automatically rewarded, with investors demanding clearer returns on incremental spend.
• Healthcare stands out as relatively insulated from AI disintermediation, with several industries positioned to benefit from growing AI adoption.
• We acted proactively to further insulate the portfolio from AI disruption risk, while taking advantage of indiscriminate and misplaced AI-driven dislocations.

Market Review: Volatility Broadens Beyond Macro

February marked a meaningful shift in market tone. While economic data remained broadly consistent with resilient growth and a higher for longer rate backdrop, volatility increased meaningfully beneath the surface.

Renewed geopolitical instability, which intensified again in recent days, injected episodic risk-off moves. At the same time, isolated private credit stress within certain direct lending vehicles rekindled concerns about leverage and liquidity in less transparent segments of capital markets. While systemic contagion does not appear imminent, the market’s sensitivity to structural fragility has clearly risen.

Adding another layer of policy uncertainty, the Supreme Court’s decision striking down the administration’s global tariff framework briefly reduced trade-related inflation risk, only to be followed by strong rhetoric from the president suggesting alternative mechanisms could be pursued. The sequence underscored how fluid policy direction remains and reinforced investor caution around supply chains, pricing power, and cross-border exposure.

Overlaying these developments was a rolling AI-driven repricing across industries.

The AI Dislocation Trade: From Software to Financials

February’s defining development was not a single data release, but a pattern. The AI repricing began in software, where generative AI’s potential to compress pricing and reduce seat counts triggered sharp multiple contraction. It then migrated outward, first to logistics and distribution following a high-profile AI platform announcement from a micro-cap entrant (and former karaoke company), and later to real estate services, asset-light intermediaries, and portions of Financials.

The sequence has been consistent: sectors perceived as intermediated, labor-intensive, or workflow-dependent have sold off aggressively, often ahead of clear evidence of near-term earnings impairment.

Importantly, this is not merely speculative anxiety. AI’s long-term disruptive potential is real. Certain business models, particularly those reliant on service layers that can be automated or pricing structures vulnerable to compression, do face structural risk, in our view.

What February revealed, however, is that markets are currently pricing disruption breadth and velocity simultaneously, extrapolating worst-case scenarios across industries with limited discrimination. In several cases, stock declines have exceeded the scale or credibility of the immediate catalyst.

In an environment where disruption risk is being repriced rapidly and sometimes indiscriminately, structural resilience becomes increasingly valuable.

Healthcare: Differentiation in a Disruption-Sensitive Market

Against this backdrop, Healthcare stands out not as immune to AI, but as fundamentally differentiated.

In Biopharma, AI enhances discovery productivity, improves target identification, and supports more rational capital allocation. It strengthens incumbent platforms with scale, data, and balance sheet depth rather than displacing them. Regulatory oversight, clinical validation, and capital intensity remain meaningful barriers to entry.

In hospitals and healthcare infrastructure, demand is anchored in demographics, acuity, and capacity constraints. AI may improve throughput and cost efficiency, but it does not eliminate the need for physical care delivery or specialized labor. This contrasts sharply with business models dependent on workflow intermediation or service intensity that can be compressed by automation.

Recognizing this distinction, we have intentionally minimized exposure to Healthcare segments where AI-driven labor substitution or software compression risk is more direct, while selectively adding to areas where recent AI-related weakness appeared disconnected from fundamental durability, including core drug distribution platforms with entrenched scale advantages.

The distinction is not whether AI matters; it is where it enhances economics versus where it threatens them.

Earnings: Fundamentals Continue to Differentiate

February earnings reinforced the sector’s improving fundamental trajectory:

Biopharma. Across both growth-oriented and value franchises, results highlighted advancing pipelines, resilient cash flows, and increasingly visible extended growth drivers beyond near-term product cycles. Capital deployment remains active, with licensing and acquisitions aimed at strengthening long-duration portfolios. With drug pricing rhetoric meaningfully reduced relative to last year, investor focus has shifted back to clinical execution, lifecycle management, and probability-adjusted pipeline value.

Medical Technology. Procedure volumes remain healthy across key categories, and leading platforms continue to gain share through differentiated products and execution. While relative share shifts and differentiated exposure to the highest TAM segments drive dispersion, the group overall maintains limited policy exposure and minimal direct AI disintermediation risk, reinforcing its role as a durable growth sleeve.

Hospitals & Providers. Leading hospital operators reported steady utilization trends, sustained pricing power, improving labor dynamics, and incremental margin improvement. Demand remains anchored in demographics and acuity rather than economic sensitivity. The impact from the expiration of ACA enhanced subsidies has been appropriately ring-fenced. Importantly, these companies are not only insulated from AI disruption, but AI-related workflow enhancements are likely to drive considerable efficiencies and meaningful future operating leverage.

Drug Distribution & Healthcare Logistics. Core distribution and logistics businesses demonstrated stable volume growth, disciplined cost management, and the continued benefits of scale-driven competitive moats. Recent AI-related weakness in parts of the ecosystem appeared disconnected from structural realities, creating selective investment opportunities in businesses where automation risk is low relative to perceived disruption.

Life Science Tools, CROs & Diagnostics. Results within Life Science Tools were more mixed as end-market trends remain uneven. Biopharma customer demand appears comparatively more stable, while applied and government-related funding continues to lag, contributing to muted top-line acceleration. While management commentary generally pointed to stabilization rather than a clear upturn, confirmation of a durable cycle inflection will require additional quarters of consistent demand.

CROs face a dual challenge. Book-to-bill metrics have shown only modest recovery, signaling sluggish demand for new trial starts. At the same time, the sector has been caught in the broader AI repricing cycle, as investors question the long-term service intensity of certain development models. The combination of anemic near-term demand recovery and perceived automation risk has significantly pressured valuations over the past month.

By contrast, demand-driven diagnostics businesses have demonstrated steadier fundamentals, supported by recurring testing volumes and embedded clinical workflows. These models appear far less vulnerable to automation-driven compression and more resilient in the current environment.

Managed Care. Managed Care results were also mixed. While all names in the space remain pressured to varying degrees by the recently proposed negative 2027 Medicare Advantage and other policy factors, larger diversified companies showed incremental signs of margin stabilization from depressed levels. On the other hand, some companies with pure-play exposure to Medicare Advantage and Medicaid suffered earnings blow-ups resulting from some combination of aggressive pricing leading to adverse selection and persistent reimbursement pressure.

The common thread across all subsectors is differentiation, by balance sheet strength, competitive positioning, AI disintermediation exposure/insulation, and earnings durability. 

Policy: Limited New Healthcare Developments

While policy-exposed stocks weakened into the event, the recent State of the Union address contained little new for Healthcare. The remarks largely reiterated previously discussed proposals, including a restructuring of ACA coverage into a subsidized HSA-style framework, an approach that currently lacks legislative viability. No new drug pricing initiatives or structural overhauls were introduced. As a result, policy-exposed names saw a modest relief rally following the SOTU.

In short, while political rhetoric remains elevated in an election year, actionable healthcare policy developments have thus far been limited. We now await the Final 2027 Medicare Advantage rate expected early next month as the next key policy update.

Portfolio Positioning

Benestar remains concentrated in businesses where structural durability, secular demand, and disciplined capital allocation intersect, with portfolio construction guided by a balance of fundamental resilience, long-duration growth opportunity, and risk discipline.

We maintain elevated exposure to Healthcare infrastructure platforms, specifically large-scale drug distribution and logistics companies, and select hospital operators. These businesses benefit from entrenched scale advantages, volume-driven demand dynamics, operational complexity, regulatory oversight, and physical capacity constraints, which support durable earnings visibility across market cycles.

We also hold significant exposure to innovative and value-oriented Biopharma franchises, where diminishing policy risk, defensive cash flow characteristics, and increasingly visible extended growth drivers create compelling asymmetric total return profiles. In these businesses, execution on pipeline progress, lifecycle management, and capital deployment remains the core driver of value creation.

Medical Technology represents another sizable expression within the portfolio, as the space is characterized by innovation-driven growth, durable procedure trends, and limited policy sensitivity.

Finally, we remain disciplined in limiting exposure to business models with elevated earnings volatility, policy sensitivity, or structural disruption risk, while staying alert to both first-order and second-order developments that could meaningfully alter industry economics. We will continue to refine positioning deliberately as new information emerges through earnings, clinical milestones, and evolving policy signals.

Closing Thoughts

February highlighted how quickly market leadership can shift when narratives change. In that environment, we remain anchored in fundamentals, emphasizing balance sheet strength, durable demand, and long-duration growth drivers.

Healthcare continues to offer a differentiated combination of resilience and innovation, supported by improving policy clarity, disciplined capital deployment and underpinned by powerful demographic tailwinds.

We will continue evaluating developments thoughtfully as earnings, clinical milestones, and regulatory decisions unfold, and we look forward to updating you again next month.

If you’d like to discuss how a more selective, evidence-driven approach may fit within your broader portfolio, we invite a confidential conversation with our investment team.

Disclaimers

David Mandelbaum is solely an investment advisor representative and a lead portfolio manager of OnePoint BFG Wealth Partners, a registered investment adviser. Investment advisory and financial planning services offered through Bleakley Financial Group LLC, an SEC registered investment adviser, doing business as OnePoint BFG Wealth Partners. 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The market and economic data is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The information in this report has been prepared from data believed to be reliable, but no representation is being made as to its accuracy and completeness.

Nothing in this material should be construed as investment advice offered by OnePoint BFG Wealth Partners or David Mandelbaum. This market commentary is for informational purposes only and is not meant to constitute a recommendation of any particular investment, security, portfolio of securities, transaction or investment strategy. No chart, graph, or other figure provided should be used to determine which securities to buy, sell, or hold. No representation is made concerning the appropriateness of any particular investment, security, portfolio of securities, transaction or investment strategy. You should speak with your own financial professional before making any investment decisions.

Past performance is not indicative of future results. Neither OnePoint BFG Wealth Partners nor David Mandelbaum guarantees any specific outcome or profit. These disclosures cannot and do not list every conceivable factor that may affect the results of any investment or investment strategy. Risks will arise, and an investor must be willing and able to accept those risks, including the loss of principal.

Certain statements contained herein are statements of future expectations and other forward-looking statements that are based on opinions and assumptions that involve known and unknown risks and uncertainties that would cause actual results, performance or events to differ materially from those expressed or implied in such statements.

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