Two of my personal favorites, Celgene Corporation (NASDAQ:CELG) and BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), are included in the top 10 holdings (Reference my articles on CELG and BMRN).
Shares of the SPDR S&P Biotech are up 8.6% year-to-date and 21% in the last 52 weeks. I like biotechnology for portfolio diversification. The sector is also growing and less impacted by economy activity.
WellPoint, Inc. (NYSE:WLP)
Metropolitan Capital Advisors purchased shares and call options of this health benefit company during the October – December time period. However, fast-forward to February 2013 and I think it’s safe to say Finerman hasn’t seen her desired scenario at WellPoint come to fruition thus far.
On November 7, WellPoint reported third quarter earnings, stating it expected “relatively stable” earnings from 2012 through 2013. Analysts at Bank of America Merrill Lynch didn’t agree, downgrading the stock to Underperform from Buy, citing implementation risks from healthcare reform and greater uncertainty at the company. At the time, WellPoint stated the company’s search for a new CEO would take 3-6 months including internal and external candidates.
It’s difficult to determine which specific factors drew Finerman into the stock during the fourth quarter. However, I suspect she found the valuation attractive, and foresaw potential upside in the share price if the firm achieved a better-than-expected resolution.
On February 12, WellPoint named Joseph Swedish as the new CEO of the company, succeeding interim CEO John Cannon. Swedish comes to WellPoint from Trinity Health, the tenth largest health system where he also served as CEO. Analysts at Moness Crespi Hardt and Wells Fargo both responded with a “sell the news” reaction, issuing downgrades to Neutral from Buy. In addition to management turnover, Wall Street analysts agree that the firm faces margin pressure under the Obamacare system.
The newly installed CEO could certainly cause Finerman to alter her position in the New Year. Majority investors ousted former CEO Angela Braly at the end of August 2012, indicating there had been a high level of dissatisfaction with prior management. WellPoint rallied 8% on August 29 following the resignation of Braly, and now we find ourselves in a scenario where investors are lukewarm about a CEO with no prior experience at a public company.
In contrast to Finerman, Greenlight Capital’s David Einhorn liquidated his position in WellPoint during the fourth quarter, according to his firm’s 13-F filing. It will be interesting to learn if Finerman holds her WellPoint position through March 31, when Q1 2013 filings are released on May 15.
Foolish Bottom Line
Karen Finerman generally maintains a buy-and-hold approach to her investments and maintains low turnover in the portfolio. Therefore, readers can greatly benefit from studying her investment activity.
Biotechnology remains in a secular bull market, and the SPDR S&P Biotech ETF is a great way to gain exposure. Specialty retailer GNC also appears to be gaining traction with its nutritional supplements, and I believe it has upside towards Morgan Stanley’s $47 price target. However, I suspect Finerman may have sold her position in WellPoint and I am neutral on the stock.
Metropolitan Capital Advisors is required to disclose its March 31, 2013 holdings within 45 days after the quarter end. Visit johnmacris.com after the May 15, 2013 deadline, and I will update readers on Finerman’s activity during early 2013.
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The article Karen Finerman’s Insider Purchases in Biotechnology and Healthcare originally appeared on Fool.com and is written by John Macris.
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