Top Picks 2017: Tekla Life Sciences Investors

01/27/2017 6:00 am EST

Focus: FUNDS

Nate Pile

Editor, Nate’s Notes and The Wagmore Advisory Letter

My clear choice for a Top Pick for income investing is a closed-end fund that invests in a variety of both public and private companies doing work in the life sciences sector, asserts Nate Pile, editor of Nate's Notes.

Tekla Life Sciences Investors (HQL) represents an outstanding way for investors who want to be involved in biotech, but don't like the high levels of stress that come into play when owning individual stocks in the sector.

The fund allows investors to participate in the growth of this important industry without having to endure as much volatility.  

Along with this exposure to the biotech space, the fund makes quarterly distributions at a rate of 2% of the fund's net assets to shareholders each quarter. Though shareholders can specifically request to be paid in cash instead, the default is to have the payout reinvested in new shares.

And unless someone specifically needs the cash flow from the payout, we recommend that shareholders have the payout reinvested in new shares in order to maximize the returns that can be achieved over longer periods of time in the sector.

There is no doubt that healthcare stocks across the board have been under pressure lately due to not only tax-loss selling but also the potential threat of regulation to lower drug costs.

However, I think it is important for investors to keep in mind that this one of only a handful of industries that is truly capable of generating above-average growth as new products are brought to market.

That being said, the bull market for the sector is admittedly getting a little long in the tooth, and consequently, there may still be some additional downside left for the sector before the tide finally turns again.

However, our game plan calls for us to make small purchases of Tekla on a regular basis over long periods of time, and if an investor is disciplined about following this approach, we believe they will do just fine over the long-haul as well.

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