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TMFHelical (98.66)

December / January CAPS port update

Recs

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February 12, 2009 – Comments (0) | RELATED TICKERS: LIFE.DL , SIAL , PFE

 

December was a slow month for my CAPS port, nothing ended and just one addition late in the month (so no port update).

The addition was Skilled Healthcare, SKH.  I didn't know anything about the company but noted a TMF article on it that challenged readers to go to CAPS and rate it.  So I gave it a look over, but not deep study to be sure, and gave it a thumbs up.  The company runs specialty healthcare facilities and offers related services.  This is a profitable small cap, but carries a significant debt load.  I said I'd take a short term flyer on it and that has so far worked out.  But ... there is that debt, extremely low cash position, and equity entirely comprised of goodwill and intangibles.  Time to end this selection.

January was quite a bit more active.

I closed my healthcare provider selections Coventry (major CAPS loss), UNH, and Wellpoint.  The latter two had CAPS gains, but were down substantially in absolute terms over the  ~5 months I had them open. I expected that reform in healthcare would perhaps be  attained rapidly with the announcement of Daschle as HHS appointee, which would mean an uncertain but certainly somewhat altered business for these companies.  These are sure tough plays, on their own they are solid perhaps cheap companies, but also perhaps cigar buts.  With Daschle off the table, I restarted UNH and Wellpoint (February), but not with high confidence, and perhaps only for a short time.  I'm likely out of these if I get a +5 on either in the near term.

I closed Pfizer after the Wy-Pfi deal was a go.  A look back at the history of Pfizer's large acquisitions shows me that while the company has grown and flourished, the stockholders have only been diluted to a greater extent.  Since there is a significant stock component, and one used to buy a higher priced asset, I'm not in favor of the deal, so Pfizer is off the list for now.  Ironically, I think that the possibility of political pressure due to the announced layoffs makes the likelihood that the deal could collapse enough to red thumb Wyeth (even though it is priced at relatively low confidence in the completion).

I extended my pick on Amylin, under the assumption that Icahn will get this taken over sometime or other, and likely by Lilly.  The  Byetta sales haven't been rigorous though, which does not bode well.

The big play in January though (and one that has played out well) so far is a group run on biotech toolmakers.  As blogged, the economic stimulus included substantial increases in NIH funding.  Increases at NIH were meager during the Bush years.  These funds should see some spending head to these pick and shovel companies.  The government spending should more than balance the pharma reductions (spending and personnel) and tight money in the early stage biopharma world, but time will tell.  Green thumbs on the major companies that I did not have already including Life Technologies (The Applied Biosystems / Invitrogen merged entity), Gen-Probe, Bruker, Bio-rad and Beckman Coulter.  This goes along with existing bullish sentiment on companies like Millipore, Waters, Becton Dickenson, Perkin-Elmer, and Sigma-Aldrich.

I've always favor this industry as a way to play biotech, and it does look like a good time for it.

 

TMFHelical

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