Healthcare Stocks: Winners and Losers of 2016

With less than two weeks to go in 2016, there are some clear-cut winners in healthcare and some pretty dismal performances as well. The two benchmarks we watch carefully are the S&P 500 and the S&P 500 Healthcare sector as measured by the healthcare ETF (ticker: XLV). The S&P 500, after meandering most of the year, has climbed like a rocket since the election and is now up 10.48 percent. As a comparison, the healthcare ETF is in danger of closing out 2016 with a loss. Currently down -3.40 percent, it would need some significant help from all areas within healthcare to overcome the YTD negative performance. See figure below for some of the winners and losers of 2016 in healthcare. Remember too, that the healthcare sector has been relatively strong for decades and was due for a breather. We have used the correction to pick up some shares and will continue to do so. The sector isn’t going away and in the long run should thrive.

Ten Best Performing Stocks in S&P 500 Healthcare Sector ETF (XLV) YTD (12/19/16) performance   Ten Worst Performing Stocks in S&P 500 Healthcare Sector ETF (XLV) YTD (12/19/16) performance
Envision Healthcare 153.6% McKesson -27.9%
United Healthcare 39.4% Mallinckrodt -28.1%
Cooper Companies 30.6% Mylan -30.1%
Quest Diagnostics 29.8% Regeneron -30.2%
St. Jude Medical 28.2% Illumina -31.8%
Stryker 27.7% Alexion Pharm. -37.1%
Mettler Toledo 24.4% Allergan -38.3%
Merck 18.2% Vertex -38.9%
Intuitive Surgical 17.4% Perrigo -42.7%
Aetna 17.3% Endo Pharmaceutical -73.8%
Source: Bloomberg, State Street Global Advisors

Fortunately, the In Sickness and Wealth Personal Portfolio has a good deal of winners. We have a few losers also. Too, we never judge a stock based on one year of performance unless business conditions have deteriorated enough for us to consider dumping a holding (while Illumina and Express Scripts are driving me insane, we continue to hold as of now, but we’re getting a bit more nervous as they breach previous support levels).

Some stocks, which we covered in the December issue, are nearing valuations that merit serious consideration. We are close to pulling the trigger in either McKesson (or Amerisource). We have pulled the trigger and picked up some Novo Nordisk at 36 ish. We sold some puts on Walgreens Boots Alliance with the hopes of collecting some options premiums and perhaps buying the stock a few points lower should it decline. If it should rally, we still get to keep the premium. More details to come in the next issue.

Enjoy the holidays –Jodie and Dave


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