Congratulations: It's Time to Book Your Profits
By George Huang
May 8, 2009
It happened faster than I thought possible...
Last November, after Obama's win, I realized one overlooked sector was going to rocket higher on government spending. And while all the suckers piled into alternative energy stocks – which were already at obscene valuations – I showed you a much better bet to pocket a 30% "boondoggle bonus" in 12 months.
Well, it's been six months, and we're up 36% on our health care IT trades...
Company |
Symbol |
Return since November |
2009 P/E |
McKesson |
MCK |
3% |
10 |
Cerner |
CERN |
50% |
24 |
Eclipsys |
ECLP |
18% |
36 |
Quality Systems |
QSII |
45% |
27 |
Allscripts |
MDRX |
79% |
21 |
Athenahealth |
ATHN |
27% |
55 |
HMS Holdings |
HMSY |
32% |
32 |
All of these companies are working to bring America's old-fashioned hospitals and doctor's offices into the 21st century. They're replacing mountains of paperwork with bar coding, electronic health records, and web-based billing services.
Obama wants to cut health care spending. He believes the best way to achieve more efficiency is by upgrading the current archaic paper trail to a state-of-the-art health care IT infrastructure. So he vowed to invest $10 billion a year over the next five years to jump-start the process.
For an industry with an existing revenue base of about $20 billion, Obama's $50 billion plan is a significant boost. That's why these stocks have chugged higher... while the S&P ended up essentially flat – after a stomach-churning drop to the March bottom.
Simply throwing a dart at the health care IT companies would've gotten you double-digit returns without much volatility. But now, the party is almost over. And it's time to bail on the sector...
Since we checked in on these stocks in March, novice investors have piled in, pushing shares to 52-week highs. As you can see from the table above, many of the stocks' price-to-earnings ratios are approaching stratospheric levels only seen in euphoric markets.
So if you own any of these companies, use tight trailing stops to protect your profits. And don't hesitate to sell.
I believe the long-term opportunity for the health care IT sector is tremendous. But at these prices, your money is better off in your pocket.
Good investing,
George Huang |
|
|
| • |
Let your gold miners ride... IAMGOLD and International Tower Hill Mines hit 52-week highs. |
| • |
Natural gas up 4.5% yesterday... trading above $4 for the first time since March. |
| • |
For-profit education continues collapse... Corinthian Colleges and ITT Educational at four-month lows. |
| • |
Earnings today... Beazer Homes, Bronco Drilling, Calpine, Six Flags, Toyota. |
|
Last |
Change |
52-Wk |
| S&P 500 |
919.53 |
+1.74% |
-35.16% |
| Oil (USO) |
31.43 |
+4.25% |
-68.05% |
| Gold (GLD) |
89.54 |
+1.46% |
+3.36% |
| Silver (SLV) |
13.52 |
+2.89% |
-19.19% |
| U.S. Dollar |
87.95 |
+0.24% |
+19.30% |
| Euro |
1.33 |
-0.11% |
-13.55% |
| VIX |
32.45 |
-2.73% |
+78.20% |
| HUI |
335.65 |
+4.90% |
-18.89% |
| 10-Year Yield |
3.15% |
-0.01 |
-0.60 |
|
| Company |
Sym |
Industry |
International Tower |
THM |
gold |
World Fuel Serv |
INT |
wholesale fuel |
AMERIGROUP |
AGP |
health care |
Suburban Propane |
SPH |
propane |
Walter Investment |
WAC |
mortgage REIT |
Full House Resorts |
FLL |
casinos |
MEDNAX |
MD |
health care |
Pepsi Bottling |
PBG |
beverages |
Ocwen Financial |
OCN |
mortgages |
Cerner Corp |
CERN |
health care |
IAMGOLD |
IAM |
gold |
|
| Company |
Sym |
Industry |
Progenics |
PGNX |
biotech |
|
|
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