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Why I Sold Baxter And CareFusion

By Robert Freedland

The Covestor Healthcare portfolio that I manage did not escape the effects of the August sell-off which resulted in a 3.5% loss for the S&P 500 Index (SPX), the biggest dip since a 6.3% drop in May, 2012.

There were a couple of changes that were made in this portfolio although most of the stocks remained unchanged.

I sold my position in Baxter (BAX) with a modest gain. Overall I was unimpressed with the 2nd quarter results as reviewed by Zacks, with earnings climbing 4% and revenue growth growing 3%. The stock price movement was somewhat anemic and with the overall market less than stellar, I chose to part ways with this dividend-paying healthcare stock. Here is the ‘point & figure’ chart on Baxter from StockCharts.com.

In addition, I sold my position in CareFusion (CFN), also in the midst of a weak stock market environment. The stock reported earnings that missed expectations as Zacks explains and revenue actually decreased. Here is the ‘point and figure’ chart on CFN from StockCharts.

The chart actually looks relatively strong but I prefer to find stocks that at least meet earnings expectations at have growing revenue.

During August, I purchased shares of Jazz Pharmaceuticals (JAZZ). This pharmaceutical firm makes a variety of products for various medical needs as this Yahoo ‘Profile’ describes.

On August 6, 2013, JAZZ reported 2nd Quarter 2013 results. aEarnings climbed to $88.3 million or $1.43/diluted share from $66.2 million or $1.09/diluted share the prior year. Total revenues for the quarter came in at $208.3 million up from $124.2 million the prior year.

They also moved ahead and raised guidance for the full year 2013. aIf we look at the ‘point & figure’ chart from StockCharts.com we can see the strong price appreciation in this stock:

As with all of my Covestor portfolios, the Covestor Healthcare Model gives me the opportunity to utilize my own background in Healthcare to help me understand diseases and their treatments and my own passion in investing to identify potential winners in the market.

Having been an investor for many years, I know there is no guarantee of future performance based on past performance but I am optimistic that the Healthcare field will be a dynamic place to invest as new drugs, new therapies, and new means of delivering that care will be an ongoing challenge for all of us.

The investments discussed are held in client accounts as of August 31, 2013. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable.

Robert Freedland

Robert Freedland

Robert has over 40 years of investment experience and is a full-time optical surgeon. He uses his expertise in the

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