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TMFHelical (98.71)

Helical Portfolio - Still Steaming

Recs

6

March 02, 2012 – Comments (4) | RELATED TICKERS: HCN , JNJ , ROCM.DL

I mentioned last month my discomfort with the rapid start to the year.  This continues, and the bias imposed by this positive recency has me more optimistic on the year than the outlook I had originally.  That could be dangerous.  The Helical Portfolio closed February at $64,426.76.

+14.4% year to date

+24.0% CAGR from 1/1/2011 (just 14 months, and I don't expect that to keep up at all).  I have not added money to the port yet, but still plan to.

In February, I raised a bit of cash by selling Rochester Medical (ROCM).  I also collected dividends from CVS (2/2 - $16.25) and HCN (2/21 - $37).  Cash now stands at $8,124.86,  12.6% of the portfolio at the end of February.  I find myself looking at the portfolio about every other day now considering where to raise more cash, but have so far been hesitant to make changes.  I'll continue to try to avoid dropping more than 6% overall or losing 2% in any one holding from here.   Last month I wrote regarding ROCM:

"Rochester Medical had its oft recurring 'timing issues with revenue' in the quarterly numbers.  I was on the fence about selling this ahead of earnings, but did not do so.  I've held this too long in the past, but am inclined to give this another quarter. " 

I did not give this another quarter, but this lack of ease made it the most sellable holding.  I had noted when I bought it that it was a low conviction holding and "may not be long for the portfolio".  I wasn't soured on it so much as interested in increasing cash.  Overall, I had a nice gain here, up 23.4% in about 4 months.  Bought 10/17/2011 for $2,070.97 and sold 2/15/2012 for $2,554.98 (includes commissions).  I could list a CAGR here and get a big head, but instead I'll note that it is $9.55 today (I sold at $8.54), so humility is perhaps more in order.  I'm still content to have the increased cash, and if I hadn't sold it then, I would be now.

Earnings for the quarter continued to be fairly uneventful, except for with Almost Family (AFAM).  This company beat estimates for both revenues (modestly) and earnings (substantially), and jumped nicely last month and is now about 7% of the portfolio.   The home care industry suffered in 2011 due to rate cuts and increased regulation, but is recovering.  Operating cash flow margins may never be what they were in prior years, but came up nicely from the Q2 low.

OCF Margin (% of Rev)

2009     2010    Q1-11   Q2-11    Q3-11   Q4-11
 9.1%     10.3%    10.2%    6.4%      6.8%      7.7%

I'll keep an eye on this going forward, and would not be surprised to see it dip a bit from here as the 2012 rate reducions take hold.  I also expec them to look for acquisitions in this fractured and stressed industry. 

Also of note was the announced departure of Bill Weldon from JNJ. He is only going as far as the board chair, but I'm pleased to see him out of the CEO role.  Where I gave up faith in Weldon was during the congressional committee hearing (the one he showed up for), in which he felt the need to correct the questioner saying they (JNJ) had actually increased spending on quality, not decreased it. I found this completely disingenuous as the period in question covered the Pfizer OTC unit acquisition.  So of course total spend increased, but per any metric (products, revenues, whatever) it almost certainly did not.

TMFHelical

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4 Comments – Post Your Own

#1) On March 02, 2012 at 8:16 PM, Mega (99.96) wrote:

Nice job.

AZN is looking cheap, yet their patent cliff doesn't seem quite as big as FRX or LLY.  Any thoughts on them?

My only healthcare position is a few shares of TEVA.  Their last quarter was quite strong, revenues up 32% and adjusted earnings up 85% (excluding one-time charges from the Cephalon acquisition).  Of course, we'll see how "one-time" those adjustments really were.

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#2) On March 03, 2012 at 7:21 AM, portefeuille (99.60) wrote:

My only healthcare position is a few shares of TEVA

I think you might want to increase your biopharma exposure. Some suggestions are here ... 

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#3) On March 03, 2012 at 8:05 AM, TMFHelical (98.71) wrote:

I'm not too inclined toward big pharma right now with European nations moving toward more rationing of healthcare and looking to cut the drug spend first (always the easiest target).  Forrest is a bit complicated and would require more time and effort (and chance) than I'd care to put in.  Teva should be good long term, not sure this is the best entry.

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#4) On March 08, 2012 at 1:07 PM, Mega (99.96) wrote:

Porte, I don't think that's going to happen.  I don't believe I have the knowledge, temperament or time necessary for successful biotech investing.

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