Healthcare Rebounding: A quick report card as the quarter draws to a close

So, we are nearing the end of the first quarter, and how quickly it has come! Last year, healthcare stocks abysmally under-performed the market (by about 1000 basis points) as a whole, as compared with the S&P 500. Year-to-date, the healthcare sector has been on a roll. The healthcare sector ETF (which tracks the SP 500 healthcare sector index) is up 9.02% so far in 2017 compared with the SP 500 which is up 6.23%.

More importantly, for the In Sickness and Wealth Portfolio, many of our long-term Core holdings are outperforming the SP 500 and healthcare sector benchmarks. Below is a summary of some of our holdings and their YTD performance.

Illumina—aside from Regeneron, perhaps the riskiest stock we own. It’s up 25.3% YTD… but still down from where we bought it. Love the company, but competition and funding for highly expensive multimillion dollar gene sequencers at Universities and Hospitals is not exactly generous at this point.

Medtronic—one of our favorite device companies in the business of mending broken hearts. Hope to own this forever. It’s up 15.44% YTD

ThermoFisher Scientific—a company we will soon cover in depth in one of our issues. Up nearly 12%, the scientific instrument and supply company is doing quite well.

Laboratory Corp of America—our lab testing company is doing just fine and recently hit new highs. It’s up 11.97%. Hope to hold this for a long time. And to think, we actually thought Theranos might undermine them (see Poaching Unicorns).

Johnson and Johnson—arguably one of the greatest businesses ever and certainly the most dominant company in healthcare today, Johnson and Johnson recently hit all-time highs last week and is up over 11% YTD.

Becton Dickinson—a solid manufacturer in the health care world with a franchise that impacts many areas within healthcare. A visit to nearly any hospital or doctor’s office has ample evidence of BD products from syringes to blood specimen tubes.

Stryker—we featured Stryker and Zimmer, its primary competitor, in our last issue. We love Stryker. In our March Issue, we mentioned it’s getting a bit pricey. It has advanced even further since our publication date. It’s up 10.73% YTD.

The pundits have labeled the current rally the Trump rally. Be careful here. While the optimism is nice and maybe has a solid underpinning in economic growth, the overall market also is getting a bit pricey. We have watched overbought markets become more overbought… but one day, it will take a breather. We think the healthcare sector will too, but also think it will continue to outperform. Moreover, the Biotech sector looks like it’s coming alive again and that should provide additional lift for the entire healthcare sector.

Be careful out there…

Dave Lerman / Jodie Warner

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