Conservative Healthcare Portfolio:  2020-21-Key Takeaways

• The Healthcare Select SPDR Fund (XLV) gives you the most diversified play in healthcare returning 11.4% in ’20 and 4% YTD.
• The iShares NASDAQ Biotechnology ETF (IBB) adds more Beta and Biopharma weighting returning 25.7% in ’20 and (1.82)% YTD.
• Biotechnology underperformed in Q1 ’21 and Life Science Funds underperformed major ETFs; the XBI is the bellwether of bull markets.

Last October we created a Conservative Healthcare Portfolio that required less rebalancing. You can see the results in the latest data. Our model portfolio would have limited your losses YTD ib the XBI sell-off. With the recent bullish moves in the market the DOW, NAZ and S&P have reached new highs whereas Healthcare stocks are lagging. Analysts are more bullish on the economy and the ” reopening trade” is on. Over the past weekend and pronounced in late Friday’s close almost all sectors were up big.  Here are some of the S&P  winners from last week: InfoTech 4.66%, Consumer Discretionary 4.23%, Telecom Services 3.17%, Financials 1.9%, Industrials 1.76% Healthcare 1.33%. Commodities are also picking up: wheat, corn, silver, etc., and the Invesco Commodity Tracking Fund (DBC) is up steadily in 2021.

As of December 2020, the S&P 500 is more weighted toward InfoTech 27.6% and less toward healthcare 13.44% so you need to consider this in your portfolio development. Healthcare stocks are still important but lately have lagged in other sectors. And as you can see in 2020 when momentum investing was hot the XBI was up 48% largely due to the COVID theme.

Keep in mind that the healthcare sector is more defensive than infotech which moves with the market and the economy.

XBI weekly chart since 12/19 and 3/20 double bottom.

Consider the following healthcare trading and investing strategies for Q2 2021 with some bullish bias because of important scientific meetings coming up and rally off the bottom.

Consider picking large-cap winners rather than holding Merck (MRK) and the IBB. Also, add more XBI betting on a Q2 rally. The IWM correlates with mid and small-cap biotech. United Health (UNH) is a core healthcare stock.

1. Conservative– Use the weighting below for maximum diversification. Alternatively, go with a simple weighting of 50% XLV and 50% IBB for more biopharma.
2. Moderate-Rebalance large-cap biopharma to 20% and add ABBV, BMY, GILD. Take out MRK. Drop IBB to 15% Drop XLV to 15%. Up XBI to 15%. UNH and IWM remain the same,
3. Aggressive– same as above on Large caps 20%. Up XBI or mid-cap stock picks) to 25%, XLV 10%, IBB 10%. UNH 25% IWM 10%.