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TMFHelical (98.72)

Changes to the Helical Portfolio

Recs

5

August 26, 2013 – Comments (2) | RELATED TICKERS: HCN , HNT , ATHN

I have let 4 months slip by since my last update and made very few posts this year.  I’m pleased to say the Helical Portfolio is still running and running strong despite the lax commentary on it.  There have been a few changes in the last few months, so I’ll go over those and detail the portfolio as it stands now.  I’ll wait for month end to note performance.  Since the end of April, there were 8 transactions in the Helical Portfolio, 4 sales and 4 buys.  In order of date these were:

5/7/2013 - Bought 70 BAX for $4778.90 [$68.17 plus $7.00 commission]

Baxter’s bread and butter is hospital supplied products, especially around acute care and blood.  These include some therapeutic agents.  I thought it a bit of a core departure that they were developing an Alzheimer’s treatment.  While the market for such a therapeutic would be quite large, there has been little success in treatments, and the development path is long and costly.  So, while it was overall disappointing that Baxter’s effort in this area failed, it should relieve shareholders of the cost burden going forward and let the company focus on its in-hospital care products.  Expansion of health services (or just the payment of them) could benefit the company as well.  Not historically expensive (or all that cheap) and with a solid business that should not get hurt in a market downturn.  I consider Baxter a low risk holding.  Still, this is a narrow range stock, and I may be inclined to sell near $80 unless the fundamentals improve with the price.

5/15/2013 - SOLD 50 SHARES OF ICLR for$1703.96 [$34.22 plus $7.04 commission & tax]

This was a portfolio management sale.  I continue to own a substantial stake in ICON (ICLR), which at this time (8/26) is my largest holding and just under 12% of the portfolio.  I consider ICLR a medium risk company, and my guideline is to limit the % of the portfolio based on my perception of the company risk*.  In May, ICLR rose above 12% of my portfolio, and I pared it back to 10%.  I’m all for letting winners run, and ICLR has been good to me, but within boundaries.

6/24/2013 - SOLD 50 SHARES (all) OF HCN for$3112.44 [$62.39 plus $7.06 commission & tax]

I really like HCN, but the price has been rich for a long time.  When I bought this back in August 2011,I my only mistake was not buying more.  The company is a REIT, and the sector in general has been trading richly due to difficulty getting income i.e. the low interest rate environment.  Hints of tapering had this sell down a bit, and I was perhaps too reactive in my sale but that is only to say that I should have really sold sooner, when the company was in the higher 60’s.  HCN gave me a 26.9% IRR in the ~22 months I held it.  I’d like to own it again, but expect that won’t happen for years.  I’d want a lot more yield than it currently provides.  I still own some in my non-Roth IRA, but lightened there as well.

6/24/2013 - SOLD 50 SHARES (all) OF WST for$3378.95 [$67.72 plus $7.06 commission & tax]

Another sale of a company I really like.  And I really really like West Pharmaceuticals.  But, in comparison to its own history, WST was unquestionably richly priced.  Always tough to sell a company you like, and tougher to see it continue to perform after you do, but .. discipline is sometimes required and the company got above my price (and is still going).  I’ll own this again one day I suspect, but I hope at a lower price.  I owned WST less than a year (bought mid October 2012) and enjoyed a 27.8% return (43.8% extrapolated IRR).

6/24/2013 - Bought 50 SHARES (all) OF WLP for$4052 [$80.90 plus $7.00 commission & tax]

Added to the position in Wellpoint I reestablished in February

7/24/2013 - SOLD 200 SHARES (all) OF MR for$7804.36 [$39.06 plus $7.14 commission & tax]

This sale had a degree of impulsiveness to it, and perhaps was not all that well considered.  I did consider this a high risk holding, and it had crossed past my 8% threshold guideline for the portfolio*, but it is with high risk holdings that one must be most in control of impulsiveness and accepting of occasional discomfort.  In this case it was not price action that created discomfort, but China practices.  Specifically, I was concerned by the, sadly less than surprising, allegations about bribery and sales practices from GSK, and since then other pharma majors.  Mindray does the bulk of their sales in China.  Now, I cynically expect such practices are disappointingly common, and I also suspect that the finger of accusation is unlikely to be turned inward to a China based firm, but .. there was enough discomfort for at least a partial sale.  Perhaps I should have kept a modest (2%?) allocation here, as I still like the position of this company in the medical equipment market, but I opted to let it all go.  In all, I owned MR for ~23 months with an initial purchase in 8/2011 and adding to the position in 1/2013, and enjoyed a 38.3% IRR.

7/29/2013 - Bought 30 ATHN for $3328.90 [$110.73 plus $7.00 commission]

Athenahealth rejoins the Helical Portfolio.  I had sold it in November 2011 as there were delays in the award phase of establishing electronic medical records, and the penalty phase was still far off.  Now, we are closer to the stage 2 reward qualification and nearer to the point where those without EMRs established will face reimbursement penalties (still 2015 as I recall).  Also, ATHN, which established itself selling the electronic record products to small practices, signed its largest fish in Ascension Health Alliance. The ability to sign larger clients will be key to ATHNs growth, and this deal was very encouraging.  Back in with a modest position and volatility expected.  I still think ATHN is high risk.

8/20/2013 - Bought 100 HNT for $3023.60 [$30.166 plus $7.00 commission]

Lastly, I just recently bought a modest position in HealthNet.  A big reason for this purchase is that HNT will be participating on the California health exchange. This is a speculative position on my part so I consider it high risk, even though the business of health insurance is not necessarily so as there could be a delay in getting the exchanges running and operating on them is a bit ‘wild west’.  I want a position in a company focused on gaining business via the exchanges, and while HNT does not necessarily represent the truly disruptive entity I am looking for, it may be the best I can do for now.  Wellpoint too intends to participate on select state exchanges.

The portfolio as it stands today is as follows:

Symbol    Qty    Mkt Value   Risk

AFAM      200     $3,880.00    Med

ATHN        30      $3,273.30    High

BAX          70      $5,021.80    Low 

BRLI       200      $5,662.00    High 

CAH       100      $5,097.00    Med 

CVS       100      $5,824.00     Low 

GHDX     160      $5,180.80    High

HNT       100      $3,085.00     High

ICLR      250      $9,647.50     Med

MCK       50      $6,119.00     Med 

NVO       15      $2,608.20     Med

WLP     100      $8,657.00     Med

Cash      --      $20,667.48    Low

High Risk

20.3%

Medium Risk

42.5%

Low Risk

37.2%

[Target ~ 1/3 each]

 

Ralph

Helical Investor

* - To review, I have a couple of guidelines that are portfolio based.  I consider the risk of each holding, with a focus on business risk and keep high risk holdings below 8% of the port, mid risk below 14%, and low risk below 20%.  I review the portfolio any time it falls > 6% in a month, and a holding when it has losses of more than 2% of the portfolio.  The Helical Portfolio is concentrated in the sector and small number of holdings, and such guidelines keep me focused and I believe help me avoid the biases that can harm investors.

2 Comments – Post Your Own

#1) On August 26, 2013 at 8:23 PM, Mega (99.95) wrote:

Congrats on the successful exits.

Have you ever looked at Unither (UTHR)? They're on my watchlist. What about Paladin Labs (PLB.TO)? They're similar to Valeant but maybe at a lower valuation.

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#2) On August 26, 2013 at 9:01 PM, TMFHelical (98.72) wrote:

Never looked at Unither.  For a this size operation they seem a bit unfocused (outiside of PAH) to me.  I prefer to see companies focused on either a platform technology, indication space (organ or disease type), or sales focus (selling within the same core physician space).  Paladin has a bit more focus (allergy, hormone, pain).

 I do prefer product companies to those that are purely development stage, but like to see a record of delivering value such as described in this linked annual review article.

http://caps.fool.com/Blogs/a-look-at-established-biotech/774287 

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