Swiss eyecare stock Alcon is undervalued, this investor says

Raymond James Investment Counsel portfolio manager Chris Blumas says Alcon offers an attractive defensive investment supported by aging populations and growing demand for eye care.

Speaking on BNN Bloomberg’s Market Call on Oct. 14, Blumas said the Switzerland-based eye care company operates two main businesses: contact lenses and surgical products, each accounting for roughly half of its total revenue.

The investor said demographic trends provide a strong foundation for growth, with aging populations driving demand for vision correction and eye procedures.

Blumas also sees increased screen time and smartphone use as additional growth drivers, contributing to rising rates of myopia, or nearsightedness.

“As smartphone penetration around the world increases, there’s more contacts that are needed, and there’s more corrective eye procedures that happen,” Blumas said.

He said Alcon is particularly attractive because of its valuation, with the stock trading at about 17 times earnings and offering a free cash flow yield of roughly 4% to 5%.

Blumas described Alcon as a defensive business with multiple long-term growth drivers.

Asked whether healthcare stocks are beginning to recover after a period of weakness, Blumas said timing a sector rebound is difficult.

Instead, he prefers identifying undervalued companies and waiting for the market to recognize their potential.

“I find it easier to recognize when there’s value there and be patient enough to wait,” he said.

Blumas said investors who buy at attractive valuations can benefit from both earnings growth and an expansion in valuation multiples.

“Really, the price you pay dictates your rate of return,” he said.

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