Sometimes I forget why we play "Am I Diversified." I forget even why we came up with the game.
Then we get days like yesterday, and the day before and the day before that, where I remember and remember well: When a sector throws a tantrum, you don't want it to be aimed at you.
The wholesale panic, the leap into the abyss that we have seen in health care these last few days is about as vivid a reminder of what you must avoid than anything I have seen in ages. This selloff, which actually started at the end of the last quarter, has taken apart the managed care stocks, the drug stocks, the devices and finally the biotechs. Just giant swaths of selling that seemed odd at first, odd as it went from "what's your hurry, there's nothing that bad out there," to "how did they know there would be something so bad out there," to where we are right now, which is "maybe it isn't so bad and it's time to buy."
No matter, the fact is that every day there were moments in this tsunami where you simply couldn't believe the torrent of selling, but you most likely didn't even know what was going to spring a leak next. You could say, don't worry its only managed care -- and then you would see Eli Lilly (LLY) evaporated. You thought it stopped at drugs, but then it went to devices. It didn't matter how good the quarters were, the stocks were tagged and thrown away.
Which brings me back to why you need to be diversified. Being diversified is defensive, as we know: If you had all health care bought in March, you might be done for 2019! But I think, more important and less talked about, it allows you to be offensive, too.
I don't know for example, where UnitedHealth's (UNH) stock is ultimately going to go. I do know, though, that if you had extra cash, or didn't have any health care stocks or only a few of them, you could have bought some UNH -- after a tremendous quarter that sent the stock up 8 points before the CEO went on the attack against those who want to change health care, right in the darned conference call -- at as low as $208, down 79 points from its high. Sure, there can be reforms if Bernie Sanders wins and the Democrats take the Senate. But I just don't see that happening and I don't think Trump's as focused on taking on this whole pharma complex as people think, not with a Vice President that is as close to pharma, through Eli Lilly, as any I have ever seen.
If you had too much health care, though, you were most likely paralyzed and you were the one doing the selling when the stock hit the low $200s.
So what do we do now? I think that any big move up will be met with a lot of selling by people who just don't want to get hit again.
Odds say, though, they won't. More important, you wouldn't have to scramble or live in fear if you didn't have too many of these. You might have seen and see the selloff as something else entirely. A bargain.