|Written by GSCR Staff|
|Wednesday, 08 October 2014 08:58|
Have October blues got you down? Worried about how you'll get through the next few months as temperatures fall and stock prices could go with them? Are you looking for proven performance since this bull market began in 2009, with low price volatility and good liquidity?
The Health Care sector has been outperforming all other sectors, including the S&P 500 for the last 12 months. The health-care sector is less sensitive to the overall economic climate; so, it provides a defensive tilt for a portfolio. In addition, the recent uncertainty over health-care reform seems to be settled for the immediate future. While the best performing industry within this sector has been biotechnology, that industry has also been among the most volatile with high risks of drawdowns and uncertain intrinsic valuations.
PowerShares Dynamic Pharmaceuticals Portfolio (NYSE-PJP- $62.58) offers the best of both worlds because it includes the biotechnology industry as part of the larger pharmaceutical industry. It further has been among the most consistent and best performing exchange traded funds (ETFs) in this sector.
PJP uses a complex methodology to select and weight pharmaceutical companies based on fundamental and risk factors. Per PowerShares, PJP tracks the Dynamic Pharmaceutical Intellidex Index which evaluates companies for inclusion based on "price momentum, earnings momentum, quality, management action, and value…. The fund and index are rebalanced and reconstituted quarterly in February, May, August, and November."
The total assets of the fund were $1.26 billion representing 30 holdings. The fund's expense ratio is 0.58% while dividend yield is 0.46%. The trading volume is roughly 275,613 shares per day. PJP is not actively managed nor is it diversified. Its multifactor selection process tilts the fund toward mid- and small-caps (40% combined). By contrast, a market-cap weighted fund of this industry would be dominated by a handful of mega-caps like J&J, Pfizer and Merck. PJP also carries a heavy biotechnology component, including companies such as Celgene, Gilead and Amgen in its top ten holdings.
Given its narrow sector focus, this ETF would work best as a satellite holding in a diversified portfolio. We recommend buying PJP with a target price ranging from $73 to $79 within the next 12 months.
Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.
This Market Monitor blog was prepared for informational purposes only. Goldman Small Cap Research, (a division of Two Triangle Consulting Group, LLC) produces research via two formats: Goldman Select Research, which typically highlights small cap companies, and Goldman Opportunity Research, which features micro cap companies in a sponsored research format. Thus, the Select product reflects the Firm's internally generated stock ideas while the Opportunity product reflects sponsored research reports.
Goldman Small Cap Research is not affiliated in any way with Goldman Sachs & Co.
It is important to note that while we may track performance separately, we utilize the same coverage criteria in determining coverage of all stocks in both research formats. Please view the company's individual disclosures for each engagement, which can be found in each company-specific report. All information contained in this blog, newsletter and in our reports were provided by the Companies or generated from our own due diligence. Our analysts are responsible only to the public, and are paid in advance to eliminate pecuniary interests, retain editorial control, and ensure independence. Analysts are compensated on a per report basis and not on the basis of his/her recommendations.
The information used and statements of fact made have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy. Goldman Small Cap Research did not make an independent investigation or inquiry as to the accuracy of any information provided by the Company, or other firms. Goldman Small Cap Research relied solely upon information provided by the Company through its filings, press releases, presentations, and through its own internal due diligence for accuracy and completeness. Such information and the opinions expressed are subject to change without notice. A Goldman Small Cap Research blog, report, note, or newsletter is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed.
This blog does not take into account the investment objectives, financial situation, or particular needs of any particular person. This blog does not provide all information material to an investor's decision about whether or not to make any investment. Any discussion of risks in this presentation is not a disclosure of all risks or a complete discussion of the risks mentioned. Neither Goldman Small Cap Research, nor its parent, is registered as a securities broker-dealer or an investment adviser with FINRA or with any state securities regulatory authority.
ALL INFORMATION IN THIS BLOG, REPORT OR NEWSLETTER IS PROVIDED "AS IS" WITHOUT WARRANTIES, EXPRESSED OR IMPLIED, OR REPRESENTATIONS OF ANY KIND. TO THE FULLEST EXTENT PERMISSIBLE UNDER APPLICABLE LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE FOR THE QUALITY, ACCURACY, COMPLETENESS, RELIABILITY OR TIMELINESS OF THIS INFORMATION, OR FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES THAT MAY ARISE OUT OF THE USE OF THIS INFORMATION BY YOU OR ANYONE ELSE (INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOSS OF OPPORTUNITIES, TRADING LOSSES, AND DAMAGES THAT MAY RESULT FROM ANY INACCURACY OR INCOMPLETENESS OF THIS INFORMATION). TO THE FULLEST EXTENT PERMITTED BY LAW, TWO TRIANGLE CONSULTING GROUP, LLC WILL NOT BE LIABLE TO YOU OR ANYONE ELSE UNDER ANY TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY, PRODUCTS LIABILITY, OR OTHER THEORY WITH RESPECT TO THIS PRESENTATION OF INFORMATION.
For more information, visit our Disclaimer: www.goldmanresearch.com