Healthcare investing in an election year


Author: Bob Freedland

Covestor model: Healthcare

2011 was a challenging year for investors, and for the Healthcare model it was particularly difficult. Overall, the model finished the year with a 6.47% loss. I spent a lot of time during the year trying to identify the holdings in the Healthcare field that could perform well in spite of the difficult economic and market conditions.

This portfolio is particularly heavy in pharmaceuticals and generic drugs and supplies. These vary from larger companies like Abbott (ABT) and smaller stocks like Schiff (WNI).

Probably the most outstanding performer in this model is my Intuitive Surgical (ISRG) holding. This company has been innovative in developing robotic surgery for Urologic and other procedures.  Probably my biggest disappointment was my purchase of Merge (MRGE) which didn’t perform to my own expectations and was sold.

My current holding that I am most excited about is Hi-Tech Pharmacal (HITK) which has been a very strong performer since its recent purchase. This generic drug company continues to report outstanding financial results that exceed expectations and regularly pushes its stock price higher. I also believe that Schiff (WNI) may surprise on the upside in terms of performance withing this group of holdings.

The biggest challenge during 2011 was staying focused on the underlying equities and avoiding the whipsaw effects of trying to shift into and out of equities to preserve the performance of the underlying portfolio.  While moderately successful, the big aim of the coming year shall be to reduce stock trading turnover and remain focused on longer-term stock price performance, avoiding the day-to-day and hourly stresses of market swings.

This portfolio does not buy gold or other commodities but instead searches for ‘golden opportunities’ in healthcare stocks.

The upcoming election year may well affect healthcare stocks, as it becomes clearer whether the Affordable Care Act shall be preserved or whether the Republicans shall be successful in overturning “Obamacare”, preferring instead free market solutions to healthcare needs.  These issues and regulatory restraints and requirements may well affect the public perception of the desirability of holding stocks in this sector.

I look forward to 2012 as another opportunity to capitalize upon the growing and innovative technology and companies organized to assist in the delivery of life-saving and health-supporting products and services, by buying stocks in this sector.