I got the annual report in the mail yesterday and since this is one of my core holdings, I checked out their stock movements. They are reducing their healthcare exposure. Not a lot, but it is there. Also they are shorting select healthcare stocks. This is a 130/30 fund.
I remember some here had mentioned if healthcare was due for a pullback after such a long run. By saying healthcare I also include biotech, pharma and equipment etc. Prior to this there was no evidence of any paring of healthcare. Kind of like the idea that all ships rise with the tide, it seems that selected companies are being sold or shorted. There are plenty of good companies still so this is minor and just a single fund's effect.
It does seem though that this might be the beginning of a small change in the bullishness of healthcare. Not that I would sell though, but it could be worth watching to see how it plays out.
Comments
I do think though that some of the small names that maybe do not have a drug but have a really promising pipeline have run up too much. Bluebird Bio, which this fund is shorting, is a good example. +337% last year w/no earnings. That said, I think what concerns me in terms of shorting is that there's no guarantee that these names can't run further or much further or if they are successful with a treatment that's game changing. Trying to make valuation calls in this market over the last few years has often proved to be a mistake.
130/30 is an alternative strategy that's never really appealed to me (no particular reason), but this fund has done reasonably well.
Given the nature of the fund, I wouldn't be surprised if the E.R. was higher than it is.
I don't think there is that much genuine value in the market, but that's an example of something that I personally see as a pretty terrific value. Plus, the CEO won M*'s CEO of the year last year, although I'm still not sure whether or not to see that as a good or bad thing. I was impressed with how Gilead handled the Express Scripts move to the cheaper Abbvie product, and added on that downturn and have continued to add.
I actually think the large cap biotechs are still a good choice for those who can tolerate day-to-day volatility. They held up nicely in 2008, as well. As I've said, I do think a lot of the smaller biotechs have rallied on the promise of their pipeline and that's why when dealing with this sector, I'd rather either pick specific stocks or have actively managed funds or both instead of an index.
Lastly, I continue to like health care from the standpoint of I tend to focus investments on needs instead of wants. I sleep better at night with investments that at least heavily lean towards things people need versus things where I have to worry about what may be "the next big thing".
As for the E.R. of this fund, given the shorting and leverage, coming from another company this kind of fund could easily have an E.R closer to 1.75-2. I'm not saying that it's not inexpensive in a general sense, I'm saying that it could easily be more expensive, given what it is.
Kevin
Regards,
Ted
Not all of us invest solely in low cost index funds. I like some variety.
Well, I don't see it but then large cap stocks aren't my thing. I see analysts predicting revenues slowing to 13.10% in 2015 and then 3.80% in 2016. Hopefully my hesitation will act as contrary indicator and propel GILD out of its funk since last summer.
Edit: I assume these large cap biotechs with projected slowdowns in their revenue growth can make strategic acquisitions to remedy that?
@Junkster, Comparative pricing has been a thorn in patients sides. Selling a medication that costs relatively little to make at a high profit because it can save you the costs of surgery is kinda in the trickery dept. I do not bemoan the profits of any company but sometimes the reasons for the high prices are head scratching.