Last week I launched a new long-term portfolio for Zacks called Healthcare Innovators. The basic idea is to ride the megatrends of the medical field to steady, if not spectacular, gains in this decade and the next.
You can read about those long-term drivers in my article from April 21 Four Healthcare Megatrends for Investors. Incidentally, I made a numerical typo under the third driver, Earnings Power, and I still haven't fixed it. See if you can spot it.
More importantly, I also address the demise of the Affordable Care Act and its potential impact on healthcare investors. My conclusion remains that the 4 megatrends are bigger and more powerful forces over the long-term than any government legislation (i.e., help or interference).
The life or death of Obamacare will only create new opportunities in a sector with over 750 companies and a dozen different industries.
The Deep Ocean, Vast Sea of Healthcare Investing
That last point is key. The medical sector is the biggest and it has a tremendous variety of products and services. At first glance, the opportunities seem endless. And they are.
But that abundance can also be a double-edge sword for stock-pickers who can't buy dozens of companies across every industry like a mutual or hedge fund can.
We must be much choosier and that opens us up to explosive gains (and losses) which can beat (or get beaten by) the market return of the so-called "averages." And who wants to be average, right? I'd rather chart my own course on the healthcare seas than play it safe on the shore watching someone else make all the money.
And besides all the profit potential of the healthcare megatrends, there is so much fascinating knowledge to gain amidst all the science-driven companies and their R&D.
5 Winners I'd Still Buy Today for the Long Haul
My new Healthcare Innovators portfolio set out with a mission to own between just 20 and 25 stocks at any given time and to hold them for long-term gains. By necessity, that means I will also occasionally pick losers. The great news is that I get to swap out of the duds as quickly as I like and put the capital to use in better ideas.
So how did I do in the first 8 days of the portfolio which began on April 25?
Quite well, as a matter of fact. I had been researching and planning for my first 20 buys for two months before launch day. There were many days I was chomping at the bit as I saw great stocks either "on sale" or running away without me. But good planning and a bit of luck since April 25 have brought a solid start to the portfolio.
And here are the top 5 results for stocks I would still buy today...
Regeneron (NASDAQ:REGN) is a $40+ billion biotechnology company specializing in genetic therapies for vision, cancer, and rheumatoid arthritis. Along with their "big brother" partner, the French pharma giant Sanofi, they are realizing important success with several drugs being brought to market in Europe and the US. I've had my eye on REGN shares for a while and on April 27 I could not resist when I saw them dip under $370. We pounced at $366.10 and are enjoying 18.6% gains as of Thursday's close at $434.
Edwards Lifesciences (NYSE:EW) was one of my top picks and so it was added on portfolio "launch day" April 25. Good thing too since the company reported earnings that evening and gave healthcare investors some very pleasant surprises. Here's what I wrote that morning: "This premier maker of advanced and proven heart valves sold off hard last year on a reduced outlook for sales and some regulatory issues. But that hasn't changed the long-term outlook for their unparalleled technology in replacement heart valves. We want to own and accumulate these shares near $95 for long-term appreciation to $125 in the next 12-18 months." We bought EW at $98.75 and are sitting pretty after the post-earnings gap up to $110.
Alexion Pharmaceuticals (NASDAQ:ALXN) is a $29 billion biotech company focused on pharmaceutical products for the treatment of heart disease, inflammation, diseases of the immune system and cancer. The company's lead product candidates are genetically altered antibodies that target specific diseases which arise when the human immune system induces undesired inflammation in the body. Also a top pick on April 25, here's what I told my Healthcare Innovators group: "Here's another one like XYZ where I believe we have a very valuable 'falling knife' worth catching." We scooped ALXN shares at $121.01 and are glad the opportunity is being recognized by other savvy healthcare investors near $130.
Align Technology (NASDAQ:ALGN) is the $10 billion maker of the revolutionary dental technology Invisalign. It was a tough call on this one after the stock had run 40% in just a few months. But I went with the long-term view and saw the potential. Here's what I told my group on May 1 after I decided to pull the trigger on this big earnings winner: "As we discussed on Friday, this one's not a Zacks #1 yet, but it will be. Estimates and price targets are moving nicely higher as I type and will filter into the Rank by mid-week. Also, I did some homework on the patent risks. The risk is not as sizable as the strong demand and potential in international markets for this amazing smile-maker!" We bought ALGN at $133.76 and really liked today's action with shares up 7.5% to $142.
Centene (NYSE:CNC) is a $12.5 billion managed care provider operating in twenty-five states across the US. The company delivered a strong earnings report last week and analysts were busy raising estimates on the outlook. Centene signs full-risk contracts with the states to manage the health care delivery of Medicaid and Medicare beneficiaries, incarcerated individuals, foster children, CHIP beneficiaries, ACA health insurance exchange enrollees, and some commercial business inherited from their acquisition last year of Health Net. When I was planning the "architecture" of my new portfolio across multiple industries, I knew I wanted exposure to a quality player in managed care. We bought CNC shares at $73.01 on April 27 and though it won't be a rocket ship like your typical biotech, it should offer steady growth over the coming years.
If you want to see what else we're up to in Healthcare Innovators, with a dozen other stocks and industries that you should be thinking about for the next few years, stop by and see about joining the portfolio. We won't always pick winners in our 3% slice of the biggest sector, but we do intend to greatly capitalize on the exciting megatrends and profits over the long haul.