Opinions
Cole Kachur
Healthcare Leaders Income ETF
HHL-T
COMMENT
May 01, 2024
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.
Blue-chip basket of US healthcare names. Covered calls and leverage. Covered calls trade potential upside for potential income. If investor's ACB has gone down, could be because of return of capital.