The top five holdings of this healthcare fund are: UnitedHealth Group Incorporated (UNH, 17.99% of assets), Express Scripts Holding (ESRX, 10.74%), McKesson Corporation (MCK, 7.60%), Cigna Corporation (CI, 6.19%), and Cardinal Health, Inc. (CAH, 6.06%).
Fidelity Select Medical Delivery (FSHCX)
from Fidelity Monitor & Insight
We sold our 14% stake in Fidelity Select Health Care (FSPHX) and purchased Fidelity Select Medical Delivery (FSHCX), effectively eliminating our Select Model’s exposure to overpriced biotech stocks. Granted, we’ve maintained our exposure to health care, but in a very different and less volatile way.
Medical Delivery’s asset mix includes a 20% allocation to health care distributors such as Cardinal Health and specialized health care facilities (10%) like U.S. Physical Therapies. And at
about a third apiece, Delivery owns service providers (Express Scripts) and managed health care providers (insurers) including Aetna, Anthem and Cigna.
While biotech stocks continued to rise, their lofty valuations have finally caught up to them. And with biotech sales increasingly reliant on the emerging markets, China’s slowdown is another negative. Notably, Biotech fell nearly 20% this past quarter.
Medical Delivery, on the other hand, stands to benefit from industry consolidation, and may come out ahead if surging pharmaceutical costs are reined in. We also like that sales and
earnings are not tied to the emerging markets.
Jack Bowers, John M. Boyd and John Bonnanzio, Fidelity Monitor & Insight, www.fidelitymonitor.com, 800-397-3094, October 2015