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TMFHelical (98.74)

November Update of the CAPS port

Recs

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December 23, 2008 – Comments (0)

Well this is belated, but there were a number of moves made in the CAPS port in November worthy of having the reasons recorded.

 

Ended:  Pfizer (PFE), Alexandria Real Estate Equities (ARE), Seattle Genetics (SGEN), and Invitrogen (IVGN). 

 

Only Invitrogen was ended with a negative score and ended due to a delist by CAPS.  IVGN actually became Life Technologies (LIFE) following Invitrogen's merger with Applied Biosystems and really shouldn't have delisted.  I may restart LIFE but we'll see (I talked to tech support on this, but moving it back to active was impractical, and not that important to me).    The combined company should be stronger, but the history of Invitrogen is one of difficulty with seamlessly incorporating acquisitions and this is their largest one yet.  Still, perhaps they have learned and are worth an investment, at least in CAPS.  One worry is that these firms benefit a lot from the research sector i.e. government funding of NIH and such, and while the will should be there in the next administration the dollars may not be.  I'll wait to reup.

 

ARE was an underperform pick (I don't have any active underperforms).  I didn't like the low yield for a REIT focused on Biotechnology lab space and such.  It did drop as expected, but I didn't count on the market being such a downer as well.  I usually close underperforms rather quickly, but had to wait for this to drop > 50% to truly underperform the market and give me a score worth closing the pick.  Now the yield on this selection isn't quite so shabby (especially with 0% treasuries out there) but biotech companies are struggling for CASH, so it is best to avoid this REIT still.

 

Seattle Genetics (SGEN) was ended just because I was content to get a +35 score out of it.  Biotech drug developers aren't my preferred way to invest in biotech (picks and shovels rule), so no reason to be greedy (which is how most approach biotech investing sadly).

 

Pfizer was a round trip.  Ended and reupped.  It was down but still outperforming the market, which was down worse.  I'm still not sure my CAPS strategy here.  When a stock I believe in is down, but the market is down worse, I think it makes sense to close and reup the pick to lock accuracy and keep a stock I believe in at an even better price.  But, the market may rebound and erase that advantage.  Also this may not make sense with a generous dividend payer like PFE, where a basis pseudo-reinvestment of dividends can be a powerful basis adjustment, especially on a down stock.  I think if I considered PFE was a buy and hold forever stock,  I would not reup, but while I want to hold PFE now, and probably 5 years from now, I'm not sure that the couple of years post Lipitor going generic make sense.  Still on the fence on that.

 

New or Reopened Picks: Pfizer (PFE), Celera (CRA), REITS in the health care realm (HCN, HCP, NHP, VTR), American Oriental Bioengineering (AOB), ICON PLC (ICLR).  

 

Pfizer was discussed but the big move in the port was to make a bullish call on REITs in the health care sector.  REITs have been punished this year and while the health care ones avoided the early year selloff they were not immune to October.  Consequently this most secure of real estate sectors offered yields not seen in a few years.  I grabbed what looked to be the four highest quality for the CAPS port Health Care REIT (HCN - which I own), HCP Inc (HCP), Nationwide Health Properties (NHP), and Ventas (VTR).  Buying high yield stocks is a good plan for portfolio building but buying them near lows can really boost performance -- but calling bottoms isn't easy.  This call has played out well so far and will likely be a long term holding for this CAPS port.  We'll see where they are when interest rates start ticking up again.

 

Celera (CRA) was added on buyout potential.  Applied Biosystems and Celera were tracking stocks of Applera Corp (I used to work there) and were untangled earlier this year.  I expected CRA would be sold and was surprised it was ABI that went first (to Invitrogen as mentioned).  I like what CRA is doing scientifically but they have had so much cash the past 8+ years that the company management hardly developed the discipline to become a profitable entity.  That should change sometime but may well take a buyout to accomplish.

 

American Oriental Bioengineering (AOB).  I had this one before but closed it when the company used debt to initiate a share buyback.  I hate that.  Still the prospects are good and the company got cheaper, so I reupped, but am still not convinced of management.  This requires a close eye to own in reality, but the promise makes it very CAPS worthy.

 

Finally I went bullish on ICON PLC (ICLR).  This Irish company offers contract research services directed at overseas clinical trial management.  This is a growth market worth participating in.  The stumble in the stock these past few months may be a great opportunity for a long term hold.

 

That was November.  I should update for December soon, but haven't made a single CAPS port move in the past month.  Last year I reviewed my real port in January. The real ports did not do too well this past year, but the process of review is useful, so I'll open myself up to public ridicule and do so again this year (I suppose I could just do the writeup and not post, but what the heck, this is a learning environment).  Maybe I'll review my oldest CAPS port holdings as well.

 

TMFHelical 

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