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who wrote (
5/14/2012 10:11:47 PM
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Hi Paul, sorry for the long delay in reply. Just checking back in on these boards after several weeks.
re HITK. I'm still trying to understand how to best invest in the health care/pharmaceutical industry and really have only had luck with health care facilities/home health (like bottom fishing LHCG, AFAM, MDF) or buying weakness in the really big names (like JNJ). The drug companies - whether it be generics or patent protected cause me issues because I can't understand the science very well or risk of competition. As I keep trying I begin to think a broad based mutual fund sector approach for biotech/pharmaceuticals might be preferred (I use one of Fidelity's sector funds, but I know alot of folks like some sector CEFs and/or ETFs out there also).
HITK hit my stop, so I'm currently out, but If I recall the drop in HITK had to do initially with another generic firm getting FDA approval to produce Fluticasone (allergy sinus medicine), and the concern was this would eat into revenue and margins. I think HITK was the only generic producer of that popular sinus spray prior to that. To what degree that has played out in the marketplace I haven't followed (wish I knew a pharmacist to bounce some of this stuff off of). (I don't see forward earnings estimates adjustments yet but those expectations have to be pushing stock down.) But then again I see reports of HITK seeking approval for other generics on a regular basis also. We see stories of all the big name drugs coming off of patent and it makes me think these generic producers are going to have alot of new product coming down the pipeline and some of those are likely to be producable by the generic makers.
On net I don't know where that leaves me but I still take stabs in the drug area every once in a while - but I'm beginning to think I might need to treat the pharmaceuticals more like cyclicals - expecting significant bumps in the road along the way - and finding companies I like to be ready to buy on the bumps. HITK still scores very well using the Greenblatt methods - it's #15 on both of my Greenblatt inspired ranking systems right now. I don't think it ranks quite as high on the official Magic Formula website, but it'll still show up there. I know technicals are discouraged here, but I could easily see myself back in HITK when the technicals improve (ie it stops dropping).
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