Since October 6, 2010, I have been managing the Covestor Healthcare Model which has had a terrific performance to date! Since that time, the portfolio has returned an annualized 21.8% exceeding the S&P 500 during that time, which returned 17.3% but slightly lagging the S&P 500 Healthcare Index which actually has returned 23.6% during the same period.
In fact, over the past 365 days, the portfolio as of Friday, March 21st was up 52.9% in a phenomenal run. That is, until Friday, when some of the top performers in my Model came under pressure when questions were raised in Congress regarding the cost of some of the more expensive treatments including the $84,000 12 week treatment for Hepatitis C.
Some of the high-fliers in my model that were hit hard include Alexion (NASDAQ:ALXN) which closed at $159.79, down $13.87 (7.99)%, Biogen Idec (NASDAQ:BIIB) which dipped $28.51 to close at $318.53 or (8.22)%, Gilead Sciences (NASDAQ:GILD) down $3.46 to $72.07 or (4.57)%, Questcor Pharmaceuticals (QCOR) down $1.84 (2.87)% to $62.30, and Illumnia (NASDAQ:ILMN) down $8.74 (5.42)% to $152.60.
With markets already skittish over the problems in the Ukraine, continued concerns about further Fed tapering and interest rate increases, and recent suggestions that the American economy is far from experiencing a robust recovery, and the S&P already near a record high, it didn't take much of a prod to get me to sell many of these terrific companies that had produced the terrific portfolio for my Covestor model.
I sold my Alexion shares of Friday 3/21/14 at $165.24, my Biogen Idec shares at $324.30, Gilead at $71.40, Illumnia at $153.80, and Questcor at $61.91.
It is a big responsibility being a manager of a Covestor Model. Besides managing one's own holdings, one must be aware of the responsibility that a manager has to others who may be mirroring his or her moves. I remain committed to identifying investment opportunities while remaining very risk averse. As I have demonstrated, I am prepared to sell even some of my favorite stocks if I believe that the risks have grown beyond the opportunities presented. I know that some of my decisions will be wrong but over the long haul, I hope that I can continue to keep this portfolio performing in a respectful fashion.
After the above sales, the portfolio remains 70% in equities and only 30% in cash. Some of the stronger stocks in the portfolio include Actavis (NYSE:ACT), the generic drug manufacturer, McKesson (NYSE:MCK) the pharmaceutical distributor, St. Jude Medical (NYSE:STJ) the medical device manufacturer, and Amgen (NASDAQ:AMGN), another biotech stock I have stayed with.
As the dust settles out, I am prepared to re-enter the market in many of the same names I just cut from the portfolio. The Covestor Healthcare Portfolio caught a bad cold Friday. I gave it my best treatment and hopefully this patient will be up and moving again next week.
Disclosure: Author holds a position in mentioned companies.