Thursday, June 18, 2009

Healthcare in General and Contract Research Organizations in Particular Back in Good Graces

We have seen a big rotation the past 2-3 sessions into healthcare; up and down the food chain. The thesis appears to be as details of Obama-care become more fine tuned there is less confusion and bad news is better than uncertainty in the stock market.

One group that was mauled last year was the contract research organizations; as credit was shut off and healthcare firms under fire these stocks swooned. As I looked at some better performing groups not named "technology" or "commodities" I see a lot of relative strength here. I showcased 7 names from this group here about a year ago as we built a basket around this group [Aug 13, 2008: Bookkeeping - Creating a CRO Basket]

As with anything in this market now, the question is whether to chase or not. If you chase early enough you are safe, if you chase late you get punished. Below are some charts of the major players I have been following... from the looks of it (remember this is a market dominated by broad themes and sector allocations, not individual companies) the institutions moved into the entire sector about 3 weeks ago. These companies all operate in different parts of the outsourcing food chain, but to HAL9000 and program trading friends they are all the same.

Parexel (PRXL) just broke over the 200 day line today, with Icon (ICLR) poised next - the others are still quite a ways ago (so far in fact, their 200 day moving average does not show up in the scale of these charts)

No positions

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