SMIF Holdings: CELG, TEVA, BMY
BMY and CELG are both outperforming the S&P 500, yet TEVA is struggling. Healthcare consumption has been rising every quarter in the past few years, however we see political risk present in several lawsuits that are challenging President Obama’s Healthcare bill. The supreme court decision on the three cases (Florida v. Department of Health and Human Services, No. 11-400; National Federation of Independent Business v. Sebelius, No. 11-393; Department of Health and Human Services v. Florida, No. 11-398) is expected in June 2012. Until March, when the Supreme Court will start to hear arguments, we believe the sector is safe.
Overall, we judge this sector to be risk averse, low volatility, and high yield. We have identified that due to the complex capital structures of many companies in healthcare, SMIF must perform more analysis than previously thought to assess company dividend yields.
We are satisfied with BMY but plan to close out our positions in CELG and TEVA in the near future. Ideally, we will pick up JNJ, LLY, and ABT.
The current SMIF recommendation is to overweight the S&P 500 by 100 to 150 basis points.
Read the full presentation here: Fall 2011 Healthcare Sector Report