The stock market momentum continued through the second quarter. While the “Fab 5” (Alphabet, Apple, Facebook, Amazon, Microsoft) led the market, nine of the ten economic sectors represented in the S&P 500 posted solid returns in the first quarter. The lone sector with negative returns both in the second quarter and year-to-date was the energy sector. Energy has been challenged by the low price of oil and the high cost of extraction and transportation.

Technology and healthcare sectors led the way in the second quarter. Technology’s increase is not a big surprise as the aforementioned Fab 5 surge ahead, but healthcare stocks have experienced a recent bounce after two years of underperformance relative to the market. It is difficult to pinpoint where the optimism is stemming from in healthcare, but the sector entered 2016 with attractive valuations and anticipation that the regulatory environment would adjust toward benefiting the companies in the sector.

In the second quarter, we swapped a couple of our positions in the healthcare space, exchanging Novartis (tkr: NVS) for Bristol-Myers Squibb (tkr: BMY). Novartis was a long-time holding of ours that performed well over our ten-year holding period, but it was struggling with the turnaround of its Alcon eye care business. Rather than wait out the turnaround, we shifted toward a more promising growth story in Bristol-Myers Squibb and its immuno-oncology portfolio and pipeline of drugs. We believe that immuno-oncology drugs will have an important and growing role in cancer treatment and that Bristol-Myers Squibb is well-positioned to participate in it.

In the technology space, we purchased a position in Mindbody (tkr: MB). Mindbody is a cloud-based (Software-as-a-Service, or SaaS) business management software and payments platform that caters to wellness companies, including spas, salons, fitness and yoga studios.

In the financial sector, we exited our position in T. Rowe Price (tkr: TROW). We elected to sell our position given the disappointing net flows of investment dollars away from active asset managers, including T. Rowe Price. The company’s lack of exposure to the increasingly popular passive index fund market exposed the company negatively to that trend. We also found increasing evidence that the company’s previously very sticky offering of target date assets were coming under pressure from outflows.

Lastly, we trimmed our profitable position in Disney. The company’s theme park and studio business are doing great. However, a more significant contributor to earnings is their media networks business, particularly the ESPN brand. Currently, 55% of Disney’s operating income comes from that business segment. After years of dictating terms in the cable industry and driving growth at Disney, ESPN is slogging through a dramatic drop in cable subscribers as viewers are choosing to go “over-the-top” and digitally stream their viewing content. ESPN maintains expensive long-term rights to broadcast premium sports content, like NFL, MLB, and NBA games, but those deals were negotiated during a period of rising cable subscribers. We maintain confidence that Disney will navigate these challenges, but we reduced our exposure to a market weight.

Individual investment positions detailed in this post should not be construed as a recommendation to purchase or sell the security. Past performance is not necessarily a guide to future performance. There are risks involved in investing, including possible loss of principal. This information is provided for informational purposes only and does not constitute a recommendation for any investment strategy, security or product described herein. Employees and/or owners of Nelson Roberts Investment Advisors, LLC may have a position securities mentioned in this post. Please contact us for a complete list of portfolio holdings. For additional information please contact us at 650-322-4000.