Here's to Your Investing Health
Kyle is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
“The first wealth is health.” – Ralph Waldo Emerson
I haven’t written much (translation: anything), about healthcare stocks due in large part to the Obamacare/Nobamacare/election, fracas that is swimming around every one of us like starving sharks at feeding time. Following the Supreme Court’s ruling concerning the Patient Protection and Affordable Care Act (PPACA, more commonly referred to as Obamacare), I think it’s time I started paying attention (after all, it’s free). So now that we are in the midst of QE-infinity and are moving closer to a full slate of highly-anticipated debates, and ultimately, a heated historical election, it’s time to give a few of these holdings some serious homework and possible consideration. I just hope we get colorful mediators to keep us entertained for those Obama-Romney verbal slugfests.
Now provided which analysts we tend to align ourselves with, chances are we may have had a decent little run-up after the controversial decision was presented (all 193 pages of it makes for enthralling reading). The initial, knee-jerk, post-decision mantra was “insurers bad, Medicare providers good.” I realize that has the flair of plain Greek yogurt, but most of those folks aren’t blessed with the gift of creativity. But the moves made by some of these companies since the decision don’t necessarily jive with what we were told. Cigna (NYSE: CI), has had a nice, steady 6% move up from June 28th levels and looks poised to make a run at 52-week highs ($40-$50 range) after we make it through what will surely be a wonderfully volatile October. I’m going to be honest (as always, unless your cooking is borderline inedible), I don’t care much for the ancient insurer, especially since we have others in the space that offer loyal shareholders better than a 0.1% dividend yield. It’s a stoically solid company, don’t get me wrong; it's been around since the 18th century, but there are others I’m keeping an eye on instead.
On the other side of the healthcare coin (tails), WellPoint, Inc. (NYSE: WLP) has moved 12% to the downside since the Supreme Court’s conclusion. So once again, the analyst mantra makes perfect sense, of course. This name actually has “Medicaid and senior markets” in their company profile, and is currently hovering close to the low end of their 52-week range ($52-$75). The stock is well off its April highs, and down 14% year-to-date. Depending on which broker you ask (14 cover this company), you’ll get a broad spectrum of opinions with this one, as price targets are set anywhere from $59 to $83. I think WellPoint has more upside than Cigna, and it pays loyal shareholders a respectable 2% dividend yield, doling out $1.15 per share annually. But I’m still searching.
Neither of the two companies mentioned boasts a spot in the top-ten holdings list of the Health Care Select Sector SPDR (NYSEMKT: XLV), for those folks that enjoy a bit of safety from an individual stock and its proclivity for volatility. This ETF has been recommended by Josh Brown (Reformed Broker) on numerous occasions, and I tend to align myself in his camp, not only because he has great taste in music and a similar scathing sense of humor, but because he actually makes sense. Investing with this ETF provides calm in most market storms; just take a look at the list of holdings in the shelter (Johnson & Johnson, Pfizer, Merck, Abbot, etc.). The upward momentum since the High Court’s judgment has been a steady 7%, and it’s about 14% to the good, year-to-date. The ETF expense ratio is well below the category average, and the fund presently lists their yield at 1.93%.
You know we can’t stop there, since it is my steadfast duty to attempt to mention high-yielding performers that could potentially provide us the opportunity to literally swim in garish returns. For those of you that don’t know me (or care), it has been stated on several occasions that I am my mother’s favorite spawn, despite the fact that I am an only child. During weekly conversations with the woman that makes this post possible, she has mentioned Ventas, Inc. (NYSE: VTR) more than a few times. The company is a healthcare REIT (Real Estate Investment Trust, for those family members who don’t know – or care), investing in hospitals, managed care facilities, and the like. Since the company is a REIT, they must return 90% of taxable income to investors. As such, Ventas drops $2.48 per share this year in loyal shareholders’ buckets, which amounts to a juicy 4% dividend yield. To go along with that tasty morsel, the company has returned investors 12% year-to-date, and the share price has moved up almost 9% since June 28th (in case you stopped paying attention, that’s the date of the Supreme Court’s verdict).
It might be wise to consider “safer” spots with the brutal market month of October slowly approaching, and the looming election that at least one-third of our nation will surely participate in, sadly. Rather than riding the waves with individual names (unless we consider the prospective robust revenue and net income growth Ventas looks to offer), the Healthcare ETF offers a wide variety of stocks in one name, protecting our invested dollars no matter who gets elected, what gets repealed, or how bland and dry the mediators are for those debates.
kmet312 has no positions in the stocks mentioned above. The Motley Fool owns shares of WellPoint. Motley Fool newsletter services recommend WellPoint. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.