Dear Mr. Berko:
I am 52 and have a $347,000 portfolio of good growth and dividend-paying stocks. I finally got tired of holding 1,100 shares of General Electric, which I sold last week. Now I have $28,000 that I want to invest in exchange-traded funds. I have decided to go for pure growth, but I don't want to speculate. Could you recommend a half-dozen issues that have good potential for capital gains?
-LC, Port Charlotte, Fla.
Dear LC:
There are three things that are certain in the stock market: 1) It will move up, move down and remain unchanged. 2) No one is knowledgeable enough to beat the Standard & Poor's 500 index or the Dow Jones industrial average with regularity. Those who claim they can are liars. But because life is a series of random intersections-some conforming to a statistical pattern-coincidences are inevitable. But when multiple coincidences create their own patterns, a third certainty validates the stock market. 3) Open-end and closed-end funds involved in medical delivery, patient care, medical instrumentation and drugs have outperformed the Dow and the S&P for the past 20 years.
Several years after Medicare was established in 1965, a young orthopedic surgeon I knew was told by his father, who was a big shot at Merck, to triple his office size, take on two partners and purchase a large home on the water. He told his son that he and his partners would be working 14-hour days and would barely be able to handle the patient flow that would occupy his Tampa, Florida, waiting room. I also remember the father's comment that Congress had become Santa Claus-when it designed a boondoggle of tax dollars for the medical profession-and that most medical specialists such as his son would become multimillionaires after a few years.
That was about 45 years ago. It's true today, and some colleges offer courses in exploiting medical billing codes by teaching office staff how to maximize income from the Medicare/Medicaid coding system. Meanwhile, hospitals, outpatient and physical therapy centers, pharmaceutical companies, medical device companies, and contactors hired by Medicare and Medicaid are swimming in oceans of federal money. In 2013, the Pentagon spent $720 billion on defense, and in 2014, the Pentagon spent $771 billion on defense. However, health care growth and fraud are on steroids. In 2013, Americans spent $3.3 trillion on health care, and last year, we spent $3.7 trillion. This year, we're expected to spend $4.2 trillion, and by 2020, we may be spending $6.8 trillion.
There are plumes of gold dust in the air for those wise enough to purchase the right investments. And the following seven funds, trading on the New York Stock Exchange, might help you capture some of that gold.
The Health Care Select Sector SPDR Fund (XLV-$74) has a $12 billion portfolio with one-, three- and five-year returns of 25 percent, 27 percent and 19 percent, respectively. AbbVie, Bristol-Myers Squibb and UnitedHealth Group are important stocks in its portfolio.
The iShares U.S. Healthcare Providers ETF (IHF-$134), a $593 million portfolio, has one-, three- and five-year gains of 27 percent, 26 percent and 20 percent, respectively. Its top holdings are HCA, Anthem and Quest Diagnostics.
The Vanguard Health Care ETF (VHT-$137), with a $4.8 billion portfolio, has one-, three- and five-year gains of 25 percent, 28 percent and 20 percent, respectively. Its top holdings are Pfizer, Merck and Johnson & Johnson.
The SPDR S&P Health Care Services ETF (XHS-$126) has a $111 million portfolio with one- and three-year records of 21 percent and 27 percent, respectively, but lacks a five-year record. Its small portfolio-containing Amsurg, Molina Healthcare and ExamWorks-makes it very intriguing.
The iShares U.S. Healthcare ETF (IYH-$157) has a $1.9 billion portfolio with one-, three- and five-year records of 25 percent, 28 percent and 19 percent, respectively. Biogen, Celgene and Amgen are part of the portfolio.
The iShares U.S. Pharmaceuticals ETF (IHE-$176) has an $847 million portfolio, which owns Actavis, Zoetis and Perrigo, enabling management to earn one-, three- and five-year gains of 29 percent, 27 percent and 23 percent, respectively.
The iShares U.S. Medical Devices ETF (IHI-$121) has an $880 million portfolio-with such issues as Medtronic, Thermo Fisher Scientific and Covidien-and has one-, three- and five-year returns of 22 percent, 25 percent and 17 percent, respectively.
Invest $4,000 in each.
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Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.
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Published: Tue, Mar 31, 2015
