Don’t Throw Darts at This Market! Ex: Healthcare

Well, you can throw darts, but you’ve got to be a good shot and able to hit the bull’s eye.  That is because discrimination, as opposed to ‘set it and forget it’ or one-size-fits-all will be important in 2017.

You may recall my nonplussed response when Trump said “Pharma” in his first post-election press conference on January 11, and they immediately reversed and tanked the entire Healthcare sector with momo and crack-driven casino patrons and black boxes in the sector hitting the sell button.

Market Paints Medical Devices With the Pharma Brush on Trump

The height of knee jerk stupidity.  Trump mentions Pharma and the need to bring down the hammer on it and the market sells off anything Healthcare related.  Get this; Medical Devices… [man it’s hard to think and type straight with Trump in my ear]… are not subject to the same dynamics.  The pricing pressure in the Med Dev industry – especially as relates to Medicare – is completely different.  In my experience, we were always under pricing pressure.  Devices are not drugs, folks.

Anyway, using the U.S. Medical Device iShares (IHI, in which I am positioned, along with some individual device companies) as a proxy for the Medical Device sector, we see new recovery highs being made.  We followed IHI in NFTRH all through 2016, as I sold it noting its overbought status.  We also noted the subsequent buying opportunity on post-election (unfounded) bearish hysterics.

ihi

Meanwhile, there are still many questions up in the air with respect to the Trump admin and the general Healthcare sector, especially regarding drug prices.  We get that, it is a real fundamental consideration.  But Medical Devices, as I’ve said til I’m blue in the face, has dual, even triple potential positives going for it.

  1. 21st Century Cures Act, enacted.
  2. Possibility (probability?) that Trump admin repeals the Medical Device tax funding component of ObamaCare.
  3. In my actual experience, the sector is relatively stable during recessionary cycles.

The market seems to have agreed with the case we’ve been laying out for months now, both in NFTRH and here, publicly.  The IHI-IYH ratio has been bullish for most of 2017 thus far.

ihi-iyh

Finally, for frame of reference, here is the composition of IHI that I downloaded from iShares, as noted in an NFTRH update several weeks ago.

ihi holdings

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