Individual Investor

Robert Freedland

Ophthalmologist,Hospital and Health Care

Education Princeton University and University of California, Davis
Qualifications AB, MD
Investment Experience Managing own investments for 42 years, active stock blogger/podcaster for 7 years

Healthcare

Exceptions
Sell Discipline
Allocation Discipline
Research
Approach
Summary

Investing in healthcare related stocks identifying companies with reasonable valuation and good prospects for growth including possible dividends to stockholders. These companies will range from drug, device, retail sales, electronic medical record, prescription services, and HMO/hospital companies. While emphasizing mid cap stocks, large cap and smaller capitalization companies may be included as well as emerging medical treatments/technologies.

Companies will be selected and included in this model and shall be managed by limiting losses by selling losing holdings quickly and completely and gaining stocks slowly and partially at predetermined sale prices determined by the purchase price. In the same way, the portfolio will attempt to preserve capital by moving towards a cash position during weak market environments and towards equities during periods of market strength. The market environment will be assessed by observing the price behavior of the individual holdings within the portfolio itself.

Using publicly available sources including Yahoo Finance, Morningstar.com, and Google Finance, this fund will try to identify companies with longer-term records of growing revenue, earnings, and free cash flow. Consideration will be given to companies demonstrating improving fundamentals as well as reasonable valuation in terms of commonly available ratios including p/e, PEG, and price/sales ratios. Dividend payments will also be considered in a favorable light for investment decisions.

Initial allocation will be less than ten stocks, slowly working up to a maximum of twenty holdings. These holdings will be of equal weight and represent 50% of the cash available for investing. Subsequent purchases on buy signals. An attempt will be made to provide a diverse group of holdings across the healthcare field. Portions of appreciating stocks will be sold and these sales will be used as "buy signals “until 20 positions reached. This portfolio will hold at least a minimum of 5 positions.

Positions are closed out only if they decline to preset levels as determined after an initial purchase or after gains in which case sale points are increased to trail the appreciation targets by pre-determined amounts. With each closure of a position on a sale after a decline, this is viewed as a negative signal resulting in a shift to cash unless at minimum portfolio size of 5 positions in which case holding is replaced.

As much as possible, no exceptions to the above strategy will be acted upon. However, reserve the right to replace any individual position with another position of similar value if fundamental information is identified suggesting prospects different than anticipated for the investment. This may include evidence of accounting misrepresentations, legal challenges, or unexpected announcement or news.

Approach Fundamental , Sector Focus
Asset class Equity
Geography US
Sectors Healthcare

Replicability

100.0%

Replicable

Top 5 Holdings View all

8.2%

7.6%

7.3%

7.2%

7.1%

HMSY
SXCI
WNI
LLY
ABT

Model commentary

Here's why we sold off Apple and McDonald's

12 April 2012

Apple appeared to be stalling at the $600 level after climbing to this level in an almost vertical chart move.
Why we added biotech stock Sequenom to the lineup 12 April 2012
Costco still looks reasonably priced despite … 29 March 2012
Riding Herd Over My Model's Lineup Yields Gains 15 March 2012
Three healthcare stocks I'm buying: Mako, ResMed … 13 February 2012

Performance detail

Manager
S&P 500 Healthcare
S&P 500

30D 90D 365D SI

Performance

Inception October 06, 2010

as of May 23, 2012	Manager	S&P 500 Healthcare	S&P 500	Average Subscriber
Past 30 days	-3.4%	-2.4%	-3.5%	-3.2%
Past 90 days	3.2%	0.4%	-3.3%	2.4%
Past 365 days	-3.6%	1.7%	0.2%	-7.5%
Since Inception (Annualized)	3.8%	10.4%	8.2%	-
2012 (YTD)	7.9%	3.9%	4.9%	6.5%
2011	-6.5%	10.2%	0.0%	-10.7%

Risk Metrics

Last 365 Days

as of May 23, 2012	Manager	S&P 500 Healthcare	S&P 500
Best 30 days	8.6%	10.6%	13.6%
Worst 30 days	-12.6%	-15.8%	-16.7%
Volatility	19.7%	19.3%	23.2%
Sharpe Ratio	-0.19	0.08	0.00
Sortino Ratio	-0.28	0.10	0.00
Maximum Drawdown	-17.2%	-16.8%	-18.8%
Value-at-risk (95%, 1 week)	-4.6%	-4.5%	-5.4%

	vs. S&P 500 Healthcare	vs. S&P 500
Information Ratio	-0.44	-0.27
Alpha	-4.7%	-3.7%
Beta	0.83	0.68
R-Squared	0.66	0.64

Latest transactions view all

Average trades per month 11.0

Executed	Symbol	Security	Replicable	Type	Price
05/23/12	HMSY	HMS HOLDINGS CORP		Buy	$25.45
05/22/12	MCK	McKesson Corp		Sell	$87.07
05/21/12	LLY	ELI LILLY & CO		Buy	$40.57
05/18/12	PRX	PAR PHARMACEUTICAL COS INC		Sell	$39.11
05/17/12	ALGN	ALIGN TECHNOLOGY INC		Sell	$30.34
05/17/12	RMD	RESMED INC		Sell	$32.34
05/16/12	ISRG	INTUITIVE SURGICAL INC		Sell	$537.19
05/10/12	WNI	Schiff Nutrition International Inc		Sell	$17.13

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Important Information

1. Past performance is no guarantee of future results.

2. Performance of the model manager's account is calculated by Covestor on a daily time-weighted basis, including cash, dividends and earnings distributions, and broker commissions. Manager returns include trades that fail Covestor's trading rules, do not reflect any Covestor suitability or risk score restrictions and are exclusive of Covestor fees. More

3. Average subscription returns ("Avg Sub" or "Avg Client") are calculated by Covestor and are composed of the average, daily, time weighted returns of all active subscriptions to the underlying model. These daily average returns are then linked together for the timeframe requested. In addition, these returns include cash, dividends and earnings distributions, brokerage commissions, Covestor advisory fees, and reflect individual client suitability and risk score restrictions. More

4. All graph data is as of the end of day for the referenced period, unless otherwise specified. The subscription minimum is the minimum subscription required to follow a particular model. The minimum amount is determined by Covestor, based on the characteristics of the underlying model. It should not be considered as specific investment advice for your investment situation.

5. Benchmark returns have been calculated by Covestor using a time-weighted calculation of daily index valuations and do not include cash, dividends and earnings distributions, or transaction costs. More

6. Leverage indicates the level of margin utilized and is calculated by dividing gross exposure by portfolio net liquidation value.

7. All Model Manager information including personal data, profiles, strategies, monthly investment reports, and historical results outside of Covestor has been provided by the Model Manager. Covestor makes no representation or warranty of its accuracy, completeness or relevance and it does not represent the opinions of Covestor. Transaction history is available upon request. Model classifications (Approach, Asset Class) are provided by Covestor, and are intended to serve as a general guide.

8. Top Replicable Holdings: These securities are currently held in the model manager's brokerage account. Those marked as "Replicable Holdings" currently pass Covestor's trading rules, subject to individual client constraints. Eligibility for replication may change over time. Actual client subscription holdings may vary.

9. Latest Transactions: These transactions were executed in the model manager's brokerage account. Those marked as "Replicable" () passed Covestor's trading rules and were eligible for replication at the time of execution, subject to individual client constraints. Eligibility for replication may change over time. Actual client subscription trade activity may vary.

10. S&P 500 Index is an unmanaged index compiled by Standard & Poor´s Corp. Index returns do not reflect any management fees, transaction costs or expenses. Individuals cannot invest directly in an Index. S&P 500 index data: S&P 500 Copyright © 2012.

11. Dow Jones index data: CME Group Index Services, LLC 2012

Robert Freedland