Healthcare: In the Running for a Gold Medal

We are approaching the final stretch in 2017 with summer fading away and fall lurking in the midst. We couldn’t be happier with the healthcare sector so far in 2017. After a rare underperformance last year, the sector has come roaring back and – with the exception of the technology sector – the S&P 500 healthcare sector is up just under 20 percent (while the technology sector is up exactly 20 percent). Some of the standouts:

Vertex Pharmaceuticals—on the heels of strong sales of its Cystic Fibrosis drugs, the company has more than doubled in price YTD (9/11/17). Some have speculated that it was ripe for a takeover, but that now seems unlikely given the high price tag.

Align Technology—the company that revolutionized orthodontics with their INVISALIGN clear orthodontic devices was up 88 percent. How we at In Sickness and Wealth missed this one is beyond me. It has a stellar balance sheet with NO long or short-term debt and fantastic growth prospects at home and abroad. We can only hope for a sell off to get into this company because it is obscenely expensive at current prices.

Illumina—was trying to test our patience over the past year, but has rallied smartly in the wake of the biotech resurrection of 2017. It’s well above our purchase price and is up 63 percent YTD

CR Bard—was another standout in this sector, mostly because Becton Dickinson (another ISAW holding) made a tender offer for Bard and the stock is up 44 percent year to date.

Thermo Fisher Scientific—another one of our holdings, is up an impressive 35 percent so far this year.

Moreover, as we posted in a blog a week ago, the biotech sector has finally caught fire with the NASDAQ biotech sector up over 25 percent, as of September 11, 2017.

Despite two incredibly destructive hurricanes, feeble economic growth, a North Korean leader bent on launching nuclear weapons and a Republican administration that can’t seem to get it together, the S&P 500 made a new all-time high today. True, the market is beginning to look a bit overextended. But when you set new highs against a weak economic backdrop, such as we are experiencing, that is encouraging. Moreover, with innovative new protocols such as CAR-T treatments (Novartis recently received approval for a CAR-T drug) and PD-1 inhibitors (made by Merck and Bristol Myers), cancer patients can look forward to improved survival times. I look for healthcare to continue its outperformance and finish 2017 as the number one or number two performing sector. With either a Gold or Silver medal, our holdings should prosper.

Be careful out there!

David Lerman / Jodie Warner

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