Opinions
Jaime Carrasco
Healthcare Leaders Income ETF
HHL-T
WAIT
Oct 16, 2015
Stock price when the opinion was issued
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The unhedged stock. Is covered call, boosting yield. Healthcare stocks have sold off, like Eli Lilly, though ISRG has done well. Is a lot of change in healthcare amid the change in presidents. So, this sector is sadly on the back burner. If you hold it, you get paid a good dividend as you wait.
Paying about 99 bps MER for a covered call strategy, giving you a 9-10% dividend yield. A lot of investors are really attracted to that yield. But when you compare the covered call strategy against the underlying securities, you'll find that a lot of the time you'll do better just owning the underlying healthcare index. Covered calls mean you get struck out without realizing some of the upside of names in the portfolio.
If you need the income, fine. If not, just own the underlying stocks or index -- pay less in management fees, capture upside. Over time, that will give you a better total return.
He does own healthcare, but in a very specific space. See his Top Picks. Healthcare is fairly undervalued compared to history, mainly because we have many different industries within the healthcare space. Big pharma, biotech, distributors, medical devices, etc. Some are doing extremely well, and some not at all.
This holds the US' top 20 healthcare companies with a combined market cap larger than the TSX. The changes that Trump and RFK want to make are driving this sector down, lots of negativity. Is very volatile. However, more inflows are coming into this ETF, feeling that the negativity is overdone. Inflows are a good sign.
He learned very early on to not fight the Fed, and it's along the same lines as don't fight the president. He's taken direct aim at the whole sector, and he's probably not wrong that Americans are paying too much for medications. That'll make it hard for these businesses.
He doesn't get involved much with ETFs, often because he doesn't want to own the whole sector. Here, he'd take a look at individual pharma companies and find the ones you think will do well in the current environment.
An interesting way to play the sector. You're not chasing performance, and you're doing it in a balanced way. Good sector for this strategy, as it's not as economically sensitive as others.
Have some that's written and some that's not, so you don't give up all the upside. Healthcare hasn't participated in the market rally, but things should normalize with clarity in the US. Demographic trend is pretty good.
Still likes this, but is not adding to his position. He likes the dividend. He is waiting to see how much of a correction we are going to get. If we get a correction in the fall, pension funds are going to have to Sell.