Healthcare Portfolio Focus Stocks

Healthcare Text Screenshot Near Green Fern Leaf

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  • Stock picking is essential for outperformance: ABBV, LLY, MRK,  REGN, UNH, VRTX, etc.
  • ETFs and FUNDS have underperformed but the XLV has done well over 5 years.
  • SMID biotechs are in a bear market and for experienced traders.

Over the past year, we have reviewed various investment strategies for a healthcare stock portfolio with a major focus on Large Cap Biopharmaceuticals. We have also covered other healthcare sectors and provided stock picks in: Medical Technology and devices, Diagnostics and Tools, and Medical Providers and Services. The pandemic era has created unusual volatility in various healthcare sectors with boom/ bust cycles for vaccines, diagnostics, and MEDtech. Consider that Moderna stock is now trading at only 1/4 of its 2021 highs and many diagnostic stocks are cut in half from 2021 highs. Now again we see major trends XLV with GLP-1 agonist drugs for diabetes and obesity from Lilly and Novo Nordisk that have rocked medical procedures and lifestyle preferences.

The MACRO news has been a steady headwind with rising rates offering 5% risk-free treasury yields. Drug stocks despite high dividend yields have been buffeted by BIDEN Administration policies that will negotiate drug prices for Medicare. M&A is an important engine for growth markets has been impeded by FTC policies that fight big merger deals like Amgen/Horizon and Pfizer/Seagen.

SMID biotechs are seriously lagging for many reasons among them being a market that respects strong balance sheets and where long-duration investments that requires continuous raising of capital with rates rising a difficult situation. The IWM Russell 2000 is down YTD and has an underwhelming 10% return over 5 years. Small caps should lead the way for a 2024 bull market.

We have published several large-cap stock picks that should clarify your healthcare playbook which has been lagging other sectors like IT and communication stocks. The QQQ is up over 37% YTD!

ETFs have underperformed over the past 3 years. Stock picking is essential. Top funds have underperformed.

Other large cap stocks we recommended and will track on earnings: BDX, GEHC, HOLX, SYK.

Here is rundown of healthcare portfolio allocations:

  1. The core position should be UNH or another provider like HUM. Reference the iShares U.S, Healthcare Providers (IHF). United Health is driven by domestic demographics and growth is more predictable assuming cost are contained.
  2. Biotech stocks are best represented by the larger and mid cap weighted IBB which you can see is in bear market and is down 7.36% YTD. The IBB peaked in SEP 2021 at about $177 compared to about $122 today. The XBI is much worse down almost 20% over FIVE years and down 16 % YTD. He XBI is for experienced traders only and is good momentum indicator for SMID biotech stocks.
  3. MEDTech would normally be a good sector for an overweight allocation but the stocks were disrupted by the pandemic and  another factors. The IHI for example is down 13% YTD but sill has a positive return of 29% over 5 years, FSMEX was at one time among the best funds is flat. It had big run from previous five years 2015-2021 up to peak of $89.34 in 2021.
  4. The XLV return was a respectable 43 % over 5 years but has lagged lately. You could get  a better return by owning UNH and one or two other top rated biopharmas like MRK and REGN.
  5. One fund you can consider for a small position is T.Rowe Price Health Sciences Fund (PRHSX)  which has a good balance of biopharma and MEDtech. The five year return is only about 9% but it can do well in a bull market for biomedical stocks.

LONG: ABBV, ABT, AZN,GILD, LLY, MRK, PFE,  PRHSX, REGN, VRTX.

Model                        
PORTFOLIO           *            
    2020   2020 2020 2021 2022 2023    

5 yr % Total Ret

 
Stock/ETF Ticker Price Wgt Price   Price Price Price        
    10/25 % 12/31 % Perf 12/31/21 12/31/22 10/15 % Perf %Perf %  
                P 30 days YTD    
iShares NAZ Bio IBB 136 5 151.5 25.7 152.62 130.55 121.63 -4.3 -7.36 9.33  
                         
iShares Russell 2k IWM 163 5 196.4 18.3 222.45 174.36 170.27 -6.94 -2.35 10.85  
Merck* MRK 80 10 81.77 -10 76.64 115 104.01 4.33 -1 67.83  
United Health UNH 330 15 350.7 27.19 502 530.27 539.4 12.41 1.74 107.8  
SPDR S&P Bio XBI 117 0 140.8 48 111.96 83 69.6 -11.1 -16.14 -19.16  
Healthcare SPDR XLV 108 0 113.4 14.71 140.89 135.88 130.19 -1.98 -4.17 42.96  
T.Rowe Hlth Sci PRHSX n/a 5 99.65 n/a 104 89 86.06 -3.22 -4.19 9.17  
iShares U.S MedT IHI 50 0 54.83   65.85 52.57 45.37 -10.71 -13.7 29.05  
MedTech* ABT   5 123.5   127.46 109.83 90.87 -11.51 -17.23 31.07  
            peak yr            
                         
Tracking Comp                        
                         
ARK Genomic ARKG     93.26   61.24 28.23 25.12 -19.82 -11.02 -13.68  
Direx3X Bull LABU           7.66 3.22 -31.78 -54.46 -95.1  
FIDO Biotech FBIOX **   25.18   19.35 16.04 15.34 -6.41 -5.77 -29.47  
FiDO MEDtech FSMEX     76.15   83.18 61.58 53.72 -10.47 -12.76 2.27  
                         
DOW DIA     310   363.32 331.34 336.68 -2.86 1.61 32.92  
S&P 500 SPY     379   475 382.41 431.5 -3.36 12.83 56.37  
NASDAQ-100 QQQ     315   397.85 266.33 365.28 -2.39 37.18 109.55  
Technology SPDR XLK     128.93   161.97 124.44 168.63 -1.37 35.51 138.08  
                         
Top Biopharmas *           2022 10/15     5 yr % total  
                         
Abbvie ABBV *         161.64 147.96 -2.12 (8..45) 63.15  
Astra Zeneca AZN *         68 67.33 1.32 -0.69 81.24  
Bristol Myers Sq BMY           71.05 56.47 -5.33 -21.51 -1.81  
Gilead Sci GILD           85.39 77.65 0.44 -9.55 5.52  
Eli Lilly LLY *         447.71 609.2 1.72 66.52 451.41  
Merck MRK *         110.95 104.01 -3.52 -6.26 56.14  
Pfizer PFE *         51.24 32.11 -5.78 -37.33 -22.7  
Regeneron REGN *         725 839.63 1.62 16.37 118.56  
Vertex VRTX *         288.78 371 6.97 28.47 104.61

More By This Author:

Large Cap Biopharmaceuticals-Core Holdings For Your Healthcare Portfolio Until M&A Action Picks Up
Three Of Our Top Picks For Your Healthcare Portfolio
Healthcare Playbook Revisited - Growth Plus Value

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