Sector Rotations

Tech has led the bull rally since this summer and is probably in its last days of leading. Time to find the next leading sectors. We can get a clue as to which ones those might be from last week's action. Gold stocks and oil stocks did well last week as you can see from the portfolio below. AUY is up 25% since adding it to the portfolio, and the oil services stocks are up 4, 8, and 9%. I still think these are good sector to be in for the next few months and just imagine where AUY might go if Gold prices move up significantly.

Healthcare

Another area which may be seeing more money coming into the sector is Healthcare. After monday's big downturn, both WLP and UNH (both are HMO companies) made big moves upward. Healthcare may be a good place where people seek shelter should the market go south a little bit, but even without that, the sector has lagged a little toward the end of this rally so it has a little catching up to do. Normally a nice safe way to play this sector might be the Healthcare ETF (XLV), but I wouldn't recomend it since its largest component is Pfizer at 14%, and Pfizer got hammered yesterday for >10% after the dropping a drug from their already weak pipeline. If I bought the XLV, I'd short an equivelent amount of PFE or maybe even a little more than that.

For exposure to the sector I like Wellpoint Health Networks (WLP) and UnitedHealth Group (UNH) probably the best mostly because the nature of the insurance business makes it highly profitable. Also they both made big moves last week. UNH still has some smoke to clear from options backdating and management changes, but since the backdating problems were made public they've done nothing but make/beat their quarters and continue to grow earnings while the stock has done nothing (I know this, cause I've held it since last spring). I'll add UNH to the portfolio under $50 and look to avg down on pull backs and add to every 3 weeks buying in qtrs as was last weeks plan. Same goes for WLP under $76.5

Other names I like from the XLV ETF are Johnson & Johnson (JNJ), Merck and Company (MRK), and Amgen (AMGN). I'll add some of each of these to the portfolio as well.

The plan from last week wasn't bad, but I should have bought 1/4 of each to get immediate exposure to them, as most have since bounced back. If my limit orders aren't filled for the portfolio by thursday, I'll buy some of GOOG, GS, MA, and NYX on friday and then look to avg down over time.

Here's a look at the porfolio. It's only gold and oil, but up 1% despite being over 85% cash still.

Enjoy,
MC