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The hotter than hot sector

Hiyield007Hiyield007
edited March 2013 in Fund Discussions
Biotech and especially the Big Four of Celgene, Amgen, Gilead, and Biogen have been on an absolute tear the past couple days to add to their already large gains YTD. I play this sector by the Rydex biotech fund (RYOIX) if only because it is pretty evenly spread among the Big Four as opposed to some biotech funds which are overweight one or the other. With baby boomers turning 65 every 8 seconds it not hard to see why there is so much enthusiam for this sector going forward. Then again, the biotech boom has been in full force for over 10 years now.

Actually, the healthcare area that is the most on fire YTD and all thanks to next year's Obamacare are the hospital stocks - UHS, CYH, THC, HCA, and LPNT. I missed that area completely being asleep at the wheel.

Comments

  • CharlesCharles
    edited March 2013
    Sweet. I've long admired VGHCX. Probably ranks as one of greatest mutual funds ever...

    image
  • TedTed
    Yes, my PRHSX has a fair amount of biotech in the portfolio. I said for years that everyone should own a health care fund.
    Regards,
    Ted
  • PRESSmUPPRESSmUP
    Two of my longest held positions have positions in this space...VGHCX and VHCOX. I held both for just over 10 years. Plugging a $25k minimum into a fund at the time seemed pretty madcap, but was one of my best moves ever.

    Come to think of it, that might be a good topic for a thread....what is your longest held fund, and why has it stayed in your portfolio?
  • beebee
    Not sure if you have had the unpleasant experience of early redemption fees but one way to avoid the high minimum of VGHCX as well as the redemption issue is to purchase Vanguard's ETF health care, VHT.

    Here are two charted together over the last 8 years:
    image
  • TedTed
    Reply to @PRESSmUP: Have held PRHSX for over ten years.
    Regards,
    Ted
  • CharlesCharles
    Reply to @bee: Hear, hear!
  • scott
    edited March 2013
    I own ABT, HTA, HQL.
  • AndyJ
    edited March 2013
    VGHCX has an initial minimum of $3,000 these days. The admiral share class, VGHAX, has a $50k minimum. Neither has a redemption fee.

    Bee, M* doesn't show the same result starting with the VGHCX chart: since early 2004, at VHT's inception, the $10k invested-total return chart shows VGHCX at $21,314 and VHT at $18,260. The 1y chart does show the ETF with a little better return.

    If you started with the ETF chart, I think that gives you price/NAV, not total return. To get TR with M*, you have to start with the OEF chart and add the ETF to it. Yep, another weird M* thing.
  • beebee
    Reply to @AndyJ: Thanks, facts like this could be the difference between me being able to afford Pabst Blue Ribbon or some high end tasty microbrew kids stuff...thanks for the wierd M* heads up.
  • AndyJ
    Reply to @bee: Yah, definitely want to shoot for the good stuff ... life's too short for bad beer.
  • PRESSmUPPRESSmUP
    Reply to @Ted: and you have to be just ridiculously happy about that. In looking at the returns since 2003, that fund had one negative year, with a 15% annualized return over that period. It will be interesting to see what happens over the next few years with the changes in that fund.
  • CharlesCharles
    edited March 2013
    Reply to @AndyJ: Really good point Andy. VHT is an index exchange traded fund. It tracks MSCI U.S. Investable Market Health Care Index. It appears to be rather weak proxy to the actively managed VGHCX, which sports the great record under recently retired Ed Owens.

    Here is comparison:

    image

    Ditto for VDE and VGENX on the energy side. The former is an index, while the latter is actively managed.

    That said, both ETFs provide good sector exposure for low cost and with good liquidity.

    I'm getting more interested in ETFs these days. I recently started buying BOND because it is strategic proxy to PTTRX.
  • AndyJ
    Reply to @Charles: Hi Charles, sorry if I missed an earlier explanation, but what are the ulcer index and Martin ratio?
  • CharlesCharles
    edited March 2013
    Reply to @AndyJ: Ulcer Index (UI) is a volatility measure, like standard or down-side deviation. UI is square root of the mean of the squared percentage draw downs in value over a specified period. Martin uses same numerator as Sharpe and Sortino, excess return relative to TBill, but with UI in the denominator. Here is link to previous post A Look at Risk Adjusted Returns.
  • CharlesCharles
    edited March 2013
    Best performer life time? VGHCX. Its absolute and risk adjusted returns are extraordinary...since 1984! But again, beware, Ed Owens its skipper since inception retired late last year.

    image
  • AndyJ
    Reply to @Charles: Do you calculate those yourself? I'm not finding a source on the web from a cursory search.
  • CharlesCharles
    Reply to @AndyJ: Yep. Slave to Excel.
  • AndyJ
    Reply to @Charles: Well hey, at least Excel's a friendly slave master.
  • dicksonL
    Reply to @Ted: Hi Ted:
    Thanks in advance. I have been doing DCA inti PRHSX from 2009 or so. At 60 yo, what should be the final weightage (currently at 8%) to aim for?(in a moderate risk portfolio per MF)? No need to withdraw for some years after retirement
  • AndyJ
    Speaking of health care as an investment in general, Robert Shiller is the guest on the current WealthTrack show, where he says that there are four sector PE10's still below the median of the past 20 years: finance, energy, health care, and industrials -- so on that basis, the long-term valuation of funds like VGHCX even now is pretty decent for prospective buyers.
  • CharlesCharles
    edited April 2013
    Reply to @AndyJ: Good to see Professor Shiller bullish on something. Seems like he's always complaining that the market is overvalued.
  • AndyJ
    edited April 2013
    Reply to @Charles: I don't think he'd say he's bullish on anything, especially at these levels of the PE10 overall, but those sectors at least are less than fully valued on a long-term PE basis.

    He doesn't make specific predictions or recommendations like the loud-talking financial commentariat, but more on the order of pointing out what's a reasonable valuation or not for a possible long-term investment, leaving it up to us to decide if it works in our individual situations.

    On the basis of PE10s, the U.S. market as a whole is overvalued vs. the long-term median. That doesn't mean, of course, that it can't keep going up, especially in this, um, unique econ environment.
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