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I hold HQL and PRHSX and several other funds that are significantly overweight healthcare both in the US and in developing markets. I think HQL does perform just as well as the Fidelity funds over time. Its equal to FBIOX and a little ahead of FSPHX over the last 5 years, behind both over 10 years and comfortably ahead of both over 15 years. My portfolio is designed to be overweight healthcare, so I'm just using different vehicles to achieve my goal and target different areas.
Both HQL and FBIOX hold similar companies in the biotech/genetics sphere. That is but one sector within healthcare. That sector is also showing the big gains. One reason is that sector is showing some stability compared to yesteryear when tiny companies were doing the leg work on one drug, a kind of all or nothing venture. Now the bigger companies are taking center stage and with multiple drugs/treatments in their pipelines can withstand the shock of a failure a bit better.
This sector of healthcare is where the biggest money is, compared to imaging diagnostics or software solutions etc.
For me, HQL and THQ are ideal in my Roth IRA because of their distributions. While it may not be completely logical, I prefer CEFs to ETFs. I like playing the discount, when possible. Only ETF I have is MOAT.
We remain overweight in healthcare for equity holdings. In the continuing environment of cheap money we regard the health area to offer more in the merger and aquistition, versus other sectors for M & A.
To move this thread in a slightly different direction I have invested in healthcare funds but not bio tech funds because I wanted the manger to make the decision on whether at any given time Big Pharma or medical equipment was better value than biotech. It just seemed to me the manger would be more knowledgeable than me about what areas to emphasize. I have vague idea bio tech underperformed healthcare for most of the 90s after 1991 but I have not confirmed this. Bottom line is whether the extra risk of bio tech appropriate compared to healthcare and I certainly don't know the answer.
Jerry, but then why health care if you trust managers? Managers of broad based funds may make their own decision whether to invest in health care or anything else, see e.g. Primecap funds which often invest in healthcare if they believe that this is a good choice. (I am asking this question even though I am overweight in healthcare.)
My PRHSX more than doubled over the last couple of years. Unfortunately, a very small percentage of the overall portfolio to make any significant difference (:-
Excellent question Finder but I actually have an answer (which might not be so excellent) Basically to some extent I believe managers have a shorter term horizon than I do because of how they are evaluated.Therefore If I believe the Long term prospects are good I won't worry about the short run. I suspect you have a similar view .Managers of healthcare funds pretty much are always fully invested but I suspect do things like go to high dividend big Pharma if they are somewhat bearish.
I also as indicated believe health care managers can do a better job of picking stocks or sectors than I do and my main concern is as I suggested if trying Bio tech is worth the risk
Jerry, this is an interesting point about the long term view. Maybe then one should try to find managers who also are long term thinkers. For example, in the long term OAKLX did great, and this year it did really well too. Now it is 42% in financials and 4% in health. Meanwhile Primecap managers are also long term thinkers, but POAGX is 31% in tech, 29% in health and 2% in financials. I do know that they have very different styles, but they are ready to wait a lot, and yet they make very different market calls. So puzzling...
Holding VGHCX, VPMAX & FBIOX, I have to agree with Jerry. Health care funds will be important for the 30 years that it takes the boomers to move from retirement to interment (I think that's an original phrase), but I don't know which companies to pick. Admittedly, I think medical biotech offers the best upside for the foreseeable future, but a less constricted health fund may do better later. General stock funds gravitate to their areas of expertise, and they may not have a good health sector analyst, although they should. Consequently, they will invest in areas that they understand.
I worked in healthcare almost my whole life. Working in a hospital I could see which areas had the promise of great growth. Biotech has to be one of the leaders. It's amazing to see the advances in this area. Bio-pharma is a huge part of this. Big pharma is also big but not as much as bio. Diagnostic imaging is another good area. The scanners keep getting better and better. Because of this, areas like cardiac intervention and stroke intervention have been some of the fasting growing treatments. Cardiac catheterization has been growing in an effort to stop the heart attack while in progress. Most good hospitals developed a time frame from door to table as we called it. Anyone presenting themselves with chest pains would get initial treatment. Confirmation with testing would follow and then right to the cath lab. The hospital I worked in had two cath rooms at first. When I left they had 12.
Finally hearth are was late in the game to adopt technology but they are diving head first into it now. Medical records, patient charts and the processes of ordering tests and drugs are now computerized. Most hospitals have medicine cabinets that dispense doses of medicine instantly. Doctors can enter orders on a computer screen instead of writing which always needed second opinions as to what they wrote.
If there were ETFs that dealt with these three areas definitely, I would invest in them for the long term.
@JohnChisum, thanks for your post, that's very interesting and helpful insight. Considering your location, do you have any thoughts about the relative opportunity in healthcare in emerging markets vs. developed markets? In some basic way, with more than 80% of world population in emerging markets, and a lot of that in Asia, it would seem that there's huge potential as a growing middle class uses more healthcare. At the same time, the populations in emerging markets are actually growing whereas most developed markets are barely sustaining themselves or might even be shrinking. Meanwhile, the developed world is aging fast and that means their need for more healthcare is increasing now.
@jerry and @finder, I use all methods of investing in healthcare. I use HQL for more biotech specific exposure as well as private equity. I use PRHSX for general exposure where I expect the manager to decide which areas make the most sense to invest at any given time. I also hold funds like POAGX that are overweight healthcare and while I don't make those investments specifically because of the exposure, I'm happy when they think its a valuable area to be overweight in. And finally, I own a few specific stocks, PFE, ESRX, BSX and LXRX where I thought they were very good values when I bought them and they haven't reached my targets yet.
Since my objective is to be overweight healthcare, I don't see much need to limit my strategy to a single vehicle and in general I don't think there's going to be a lot to be sad about when looking back on exposure to healthcare. One thing or another might outperform during any specific time period, but overall I'm overweight because I believe I'll get better returns than other sectors.
@LLJB, The potential is huge for the emerging markets. As society is growing towards a model whereas a person is a citizen of a country but chooses to live elsewhere. There is a demand for good healthcare everywhere. Poorer countries will lag the others by a wide margin. Thailand is one country that has very modern hospitals although only select ones. India could very well be the next big market in the healthcare sphere.
The basic premise of this is the growth of workers from the emerging markets working outside their country. They see the developments of the modern countries and then demand them upon returning home.
Australia is far from being an emerging economy but their healthcare has a lot of research and development built in to it. I just watched a show on bionics and cyborgs. They are going full steam ahead in this area down under.
Is anyone aware of any funds or ETFs focused on Asian healthcare? I did some searching on M* and google and although I found some private equity funds with minimums much higher than my net worth and a few indices that seem to focus on Asian healthcare, I couldn't find anything that was even close from an ETF, CEF or mutual fund. Maybe we should start one!!
@JohnChisum, thanks for your response. I looked at all the Matthews funds and they have a few with low/mid-teen investments in healthcare but based on what you've said and your experience in the industry, it strikes me as a big opportunity. I'm not really sure what to do about it and I'm not sure I want to try to create my own "fund", but if you have any suggestions I'd be happy to hear them, and maybe I'll drop a note to Matthews and ask if they've ever given any consideration to a healthcare fund in Asia.
Is anyone aware of any funds or ETFs focused on Asian healthcare?
EMDD and ECON are EM consumer names, but unfortunately offer little (EMDD) or nothing (ECON) in the way of healthcare. Abbott Labs (ABT) in the US is a very boring way of playing healthcare and nutrition in EM, as around 45% of their business (and growing) is EM.
I agree on the Abbott play. They are dominant in nutrition for both babies/young children and adults. Their brand recognition is a good strategy here with Ensure and Pediasure. Nestle is another company in the same sector.
@JohnChisum, you're right, I looked at MATFX. MEASX, MSMLX and MJFOX are in the same neighborhood, and the big winner to my great surprise was MCSMX, which has 22.4% in small-cap Chinese healthcare. That's pretty good, and I would expect/hope for China to get a big allocation if there was an EM or Asia focused healthcare fund, but I'm not struggling for exposure to China generally.
@scott, interestingly, two frontier market funds I own, WAFMX and MEASX, both have investments in Abbott Labs Pakistan. Considering its 5-year average return is 51.18% (according to M*) I guess that's a somewhat more exciting connection to ABT.
I think you could make a great investment thesis out of either EM or Asia-specific healthcare, as a play on the size of the population, as a play on the increasing middle class, as a play on aging, as a play on exposure to the local economies rather than what they can export to the developed world, in a somewhat defensive sector (although maybe not as much in the developing world). Its all the goodies in one bag with an investment product that isn't available anywhere from what I can tell, at least to the general investing public. Maybe I'm overlooking some big things, though. Maybe the rising middle class will spend a little of their extra money on healthcare but most of it on nicer clothes, or better food, or an iPhone.
I'm just struck by what JC was saying about the people who go work abroad and come home with expectations. I actually know this from a slightly different perspective because my wife is from a country that was behind the iron curtain and when I started paying for private rather than public medical and dental care, she suddenly realized the care she had received her entire life was pretty bad. Her expectations have changed completely.
I did write to Matthews a few hours ago and I'll write a note when/if they respond.
Another thing to consider, while the US demographic is top heavy on older people and growing further in that direction because of the boomers, much of Asia, especially the EM side is a much younger demographic. Philippines, Indonesia, Malaysia, Singapore, and some others have had huge growth in younger populations. Philippines has 100million, Indonesia is 240 million. Malaysia and Singapore are smaller in population. So the need for healthcare for seniors is not as big as the US or Japan which has a large aging population.
@ finder: "Why do you invest in FBTCX if its brother FBIOX is doing better and does not require an adviser?" You ask a very valid question. FBIOX is not on the Morgan Stanley Mutual Platform. I wish it were, it's ER is much lower than FBTCX, and I choose FBTCX because I didn't want to pay the front=load even the ER is higher than the A Shares. Regards, Ted
Comments
Regards,
Ted
This sector of healthcare is where the biggest money is, compared to imaging diagnostics or software solutions etc.
Bottom line is whether the extra risk of bio tech appropriate compared to healthcare and I certainly don't know the answer.
I also as indicated believe health care managers can do a better job of picking stocks or sectors than I do and my main concern is as I suggested if trying Bio tech is worth the risk
General stock funds gravitate to their areas of expertise, and they may not have a good health sector analyst, although they should. Consequently, they will invest in areas that they understand.
Finally hearth are was late in the game to adopt technology but they are diving head first into it now. Medical records, patient charts and the processes of ordering tests and drugs are now computerized. Most hospitals have medicine cabinets that dispense doses of medicine instantly. Doctors can enter orders on a computer screen instead of writing which always needed second opinions as to what they wrote.
If there were ETFs that dealt with these three areas definitely, I would invest in them for the long term.
@jerry and @finder, I use all methods of investing in healthcare. I use HQL for more biotech specific exposure as well as private equity. I use PRHSX for general exposure where I expect the manager to decide which areas make the most sense to invest at any given time. I also hold funds like POAGX that are overweight healthcare and while I don't make those investments specifically because of the exposure, I'm happy when they think its a valuable area to be overweight in. And finally, I own a few specific stocks, PFE, ESRX, BSX and LXRX where I thought they were very good values when I bought them and they haven't reached my targets yet.
Since my objective is to be overweight healthcare, I don't see much need to limit my strategy to a single vehicle and in general I don't think there's going to be a lot to be sad about when looking back on exposure to healthcare. One thing or another might outperform during any specific time period, but overall I'm overweight because I believe I'll get better returns than other sectors.
The basic premise of this is the growth of workers from the emerging markets working outside their country. They see the developments of the modern countries and then demand them upon returning home.
Australia is far from being an emerging economy but their healthcare has a lot of research and development built in to it. I just watched a show on bionics and cyborgs. They are going full steam ahead in this area down under.
Regards,
Ted
PRHSX= 26.24% YTD
FBTCX= 28.15% YTD
@JohnChisum, thanks for your response. I looked at all the Matthews funds and they have a few with low/mid-teen investments in healthcare but based on what you've said and your experience in the industry, it strikes me as a big opportunity. I'm not really sure what to do about it and I'm not sure I want to try to create my own "fund", but if you have any suggestions I'd be happy to hear them, and maybe I'll drop a note to Matthews and ask if they've ever given any consideration to a healthcare fund in Asia.
their business (and growing) is EM.
http://seekingalpha.com/article/2464675-abbott-laboratories-an-emerging-markets-growth-play-with-increasing-dividends
EM or Asia-specific healthcare would make for a great ETF or mutual fund.
@scott, interestingly, two frontier market funds I own, WAFMX and MEASX, both have investments in Abbott Labs Pakistan. Considering its 5-year average return is 51.18% (according to M*) I guess that's a somewhat more exciting connection to ABT.
I think you could make a great investment thesis out of either EM or Asia-specific healthcare, as a play on the size of the population, as a play on the increasing middle class, as a play on aging, as a play on exposure to the local economies rather than what they can export to the developed world, in a somewhat defensive sector (although maybe not as much in the developing world). Its all the goodies in one bag with an investment product that isn't available anywhere from what I can tell, at least to the general investing public. Maybe I'm overlooking some big things, though. Maybe the rising middle class will spend a little of their extra money on healthcare but most of it on nicer clothes, or better food, or an iPhone.
I'm just struck by what JC was saying about the people who go work abroad and come home with expectations. I actually know this from a slightly different perspective because my wife is from a country that was behind the iron curtain and when I started paying for private rather than public medical and dental care, she suddenly realized the care she had received her entire life was pretty bad. Her expectations have changed completely.
I did write to Matthews a few hours ago and I'll write a note when/if they respond.
Why do you invest in FBTCX if its brother FBIOX is doing better and does not require an adviser?
Another thing to consider, while the US demographic is top heavy on older people and growing further in that direction because of the boomers, much of Asia, especially the EM side is a much younger demographic. Philippines, Indonesia, Malaysia, Singapore, and some others have had huge growth in younger populations. Philippines has 100million, Indonesia is 240 million. Malaysia and Singapore are smaller in population. So the need for healthcare for seniors is not as big as the US or Japan which has a large aging population.
Regards,
Ted