Use access key #2 to skip to page content.

TMFHelical (99.12)

September Update on the CAPS port

Recs

2

October 03, 2008 – Comments (0) | RELATED TICKERS: PFE , WAT , IMCL

September Update

 

It certainly seems that I chose the right sector to focus my CAPS port on.  Since I work in biotech, the healthcare segment of the market is the area that interests me the most.  With all the volatility and overall downtrend in the general market, this sector has held quite firm and my CAPS port continues to be highly rated (for now).  I've cracked the top 300 a few times and flirt with the 1000 point mark.

 

September was active in the port but before listing the transactions and thoughts behind them let me put up a few stats.

Stats 

Open picks

42 picks

18 in the red, 24 green (57.1%)

Only 1 underperform (97.6% long)

Closed picks

67 picks (only 64 count toward accuracy with 3 closed between 0 and +5)

11 closed with negative scores (red), 53 closed at > +5 (green) for 82.8%

30 of the 67 closed picks were underperforms (44.8%) including the 3 closed between 0 and +5, 37 were longs (55.2%).

Overall my strategy is to be long, but opportunistically rate holdings as underperform.  I am not greedy with the red thumbs and will close them when I get a +5 and perhaps reopen if I still don't like the prospects.  It is best to let longs run, but I will close and wait for better prices at times. The goal is to keep closed picks @ > 75% accuracy.  This seems to be the best way to 'play' CAPS.

September Moves

September was active.  In the past a high score has caused me to revert to inactivity, but I'm playing to learn so darn the torpedoes and full speed ahead.  I will say that the goal is again to learn, I'm not gunning to be a top player, just do well in my selected sector (it won't always be in favor). 

Round Trips - PFE, IMCL, MRK

New selections - MCK, PFE, CVS, MTD, WAT

Ended Picks - GSK, HHA, HHE

First the round trips i.e. picks opened and closed within the month. 

Merck is clearly struggling as a company.  While the Vioxx litigation is playing out relatively well for them, little else is going right of late and a few weak quarters are likely.  Worth an underperform after a run up, but the company isn't going to fail so not worth a prolonged underperform (take a +5 and run).  Pfizer handed me a +5 despite dropping in price because the S&P tanked worse.  That was worth a close and re-up in my opinion.  If I was long Pfizer forever, I would just let it run, but I look at PFE as a trade.  It should be good now, and 5 years from now, but I don't think I want it in that post Lipitor period of 3-5 years out.  I'd close the pick > $23 I think.

 

Lastly in this group was Imclone.  I rated it as underperform after Carl Icahn implied he was rejecting BristolMyersSquibb's offer and had another bidder.  It sounded like a bluff (but I would never put real money on the table against Icahn).  I closed this at +5 after it dropped post rumor and good thing I did since the myster bidder appears real (Lilly) and BMY raised the offer themselves.  I still think this ends up with BMY but at probably $68.  This was a gamble I was lucky to pull off honestly.

 

Closed Picks (other than round trips)

 

I closed GlaxoSmithKline after getting a +5 on an underperform.  This company is priced nicely but has too many drugs that recently went off patent or are headed for it soon.  I love the pipeline and want to be bullish GSK, but not now.  Probably will be permabull GSK in late 2009.

 

I also closed the remaining Healthshares ETFs I had as underperform (HHE, HHA).  Both of these were portfolio drags.  I don't like the design of these indexes due to both quarterly rebalancing and narrow market segment focus.  But I do like many of the companies they hold.  I'd love to find some way to say 'avoid these ETFs' without hurting my score and accuracy - but it won't be with a continuous red thumb.  Oh well.

 

New Picks

 

I've always favored companies that supply the picks and shovels to biotech i.e. reagent and scientific instrument companies.  This looked like as good a time as any to select instrument makers Mettler Toledo and re-select Waters (a company I'd had a good prior run with).  A different but related segment are drug distribution specialists and after some recent weakness, I'm going bullish on McKesson.  This company is to pharmaceutical what pipeline MLPs are to energy (without the favored tax structure and high dividend).  I'll probably want Amerisource Bergen at some point as well (not yet).

 

The reup of Pfizer I already talked about which leaves CVS.  I'm bullish on CVS long term largely due to the rollout of in-shop clinics.  CVS is leasing space to clinic operators and hoping to catch add-on shopping.  I see the reemergence of clinics as a major trend in healthcare and like what CVS is doing.  Note that Wal-mart and Target are leading this charge as well.

 TMFHelical

0 Comments – Post Your Own

Featured Broker Partners


Advertisement