Update-2 10/20 Merck (MRK) pops over 2% to $102+ on ADC deal with Daiichi Sankyo. Collaboration combines Daiichi Sankyo’s proven ADC expertise and DXd technology with Merck’s deep experience in oncology and clinical development capabilities to advance and expand the reach of ADCs for patients across multiple types of cancer.
Update-1 10/18 11a EDT Abbott Labs (ABT) 3Q beat despite COVID Dx 3% sales miss down to $2.45B. Sales down 2.6% to $10.14 B. EPS$1.14 compared to $1.15 yr earlier and raises full year midpoint guidance. Sales of the company’s body-worn glucose monitor for diabetes patients, FreeStyle Libre, surged 28.5%, helping the medtech division 14.7% organic sales growth. Stock in wide range today up over 2% but off recent bottom around $90.
Astra Zeneca (AZN) takes 5+% tumble to the $65 handle on disappointing lung cancer study in a late stage trial published as an abstract for European Society for Medical Oncology (ESMO).
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Healthcare Portfolio Focus Stocks
- 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 health care 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 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:
- 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.
- 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.
- 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.
- 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.
- 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 | |||||