Healthcare Sector: a stealth mover in 2017

  • As technology as overheated with all time highs in the Nasdaq, healthcare looks attractive at these levels.
  • I like the sector as a theme in terms and I want to own them as a basket.
  • The rhetoric on drug pricing still lurks but deregulation will help the sector.

The healthcare space has been a painful space for me. My two picks Gilead Sciences and Bristol Myers did not pan out well for me and had to sell out of those positions. However, with markets out of all time highs I had to trim a lot of gains in technology (Apple, Alphabet & Facebook). For tax purposes the loss sales in healthcare will help me offset the capital gains from my technology wins. Now back to the healthcare because with markets at all time highs(mainly from tech) healthcare is a good play with some strong fundamentals and technicals. The Health Care Select Sector SPDR ETF (XLV) is up 16% during the year and the iShares Nasdaq Biotechnology ETF (IBB) is up 18%. The interesting thing about the Biotechnology ETF is that its still 16% away from its all time high which shows that biotech and healthcare have room to run.

The healthcare sector has been in the penalty box with the political rhetoric on drug pricing from Washington. According to reports from the NY Times, Trump’s executive order on drug pricing that appears to focus on easing regulatory hurdles for the industry. The industry is pretty much getting what it has been lobbying for with this executive order. Even if the political rhetoric on drug pricing does not go away the Pharmacy Benefit Managers (PBMs) like Express Scripts are the main players that are under threat because their business models pushes drug prices up. So if any drug pricing legislation comes from Washington it would be a threat to PBMs. Right now I am not looking to pick a specific name to invest in but I want to invest in a healthcare sector theme owning a basket of stocks rather than one name. Thanks to Motif Investing, I can make up an ETF with names that I see with great value, growth and solid fundamentals. The top 3 names that make up my Motif are the following:

  1. Celgene Corporation (CELG): Celgene develops and markets therapeutics to treat cancer and immune-inflammatory related diseases.
  2. United Health Group Incorporated (DE) (UNH): United Health Group provides health insurance, health benefits and related products and services.
  3. Amgen Inc. (AMGN): Amgen develops, manufactures, and markets therapeutics in supportive cancer care, nephrology, and inflammation.

I also have a Alexandria Real Estate Equities Inc. (ARE) a REIT that owns, operates, manages and develops life science laboratory space among other names.

Disclosure: Cresco Investments has positions in CELG, UNH, AMGN and ARE.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This article is intended for information, engagement & entertainment purposes only, and is not to be construed as investment advice or direction. Investors are strongly encouraged to perform due diligence and/or consult with their financial advisor.