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After today, another calm pre-earnings quiet period will be over. We expect a cycle of rotation as investors try to get ahead of the growth spots while lightening up on more defensive themes.  

That rotation often means money flows out of Healthcare into the more robust growth names of Silicon Valley. This week saw many of our Technology recommendations surge, including Apple (AAPL: $199, up 1% since last Friday's close), which is once again the nation's biggest company by market cap. That's the good news keeping our overall universe moving ahead. On average, BMR stocks are now up 50% since our initial recommendation and a healthy 12% in the last 90 days. We're pleased.

Nonetheless, Healthcare investors feel ambushed by the selling that hit their stocks (and even our Big Pharma recommendations) out of nowhere. About 3 in 5 Healthcare companies lost ground this week, with half of them falling more than 10% in the four-day period. While people can blame Bernie Sanders' "Medicare for All" proposal or hearings on drug pricing, we just don't see the causal link.

For one thing, the Pharma companies at the center of the selling weren't actually involved in the hearings. Congress grilled executives from Health Insurance carriers and Drugstore chains, leaving the people who set the prices out of the loop and out of the headlines. And while the debate around Healthcare costs remains fierce, there's nothing new in any of the proposals. The threat of comprehensive reform has been a weight on the sector for years now, depressing multiples that would otherwise be a lot higher. Much like the Banks, which face similar long-term questions, these stocks climb a wall of worry all the time.

We also can't help but notice that the real pain in the sector hit established and speculative stocks alike. Big Pharma sank almost across the board, but those businesses are global and mature, shielded from most economic jitters. However, Biotech, which is dominated by hundreds of companies that are still working hard to get their first drug approved and start generating revenue, suffered slightly less widespread losses.

This isn't a case of investors looking for growth or safety. It's simply profit rotating out of positions that did well last quarter into likely winners of the coming earnings cycle. Medical Devices stocks were strong recently. They gave a little of it back this week. And Generic Drug makers that are unlikely to feel the pain of any market reform (their costs and prices are already low enough to keep cash flowing) lost ground as well, deflating the "Medicare for All" theory.

The good news for us is that our positions have been well insulated. Our Healthcare portfolio has stepped back 0.6% in the last four days, but thanks to Exact Sciences (EXAS: $94, up 3%) and its robust growth profile we're in much better shape than either the sector as a whole (down 1.5% this week) or either the Pharma (down 2.2%) and Biotech (down 2.6%) groups. Eli Lilly (LLY: $125, down 1%) is still within sight of record territory and has nearly doubled for subscribers over the past 27 months. The next time the market mood swings toward this sector, we expect that stock to go over the top.