Obamacare: Supreme Court Decision Will Drive Health Care ETFs (IHF, XHS, XPH, XBI, FBT, XHE, IHI, IBB)
Ron Rowland: In a few short hours we should have some big news: A Supreme Court decision on the constitutionality of health care reform. Investors have a lot at stake. Whatever the court decides will be good for some Health Care stocks Read more…
Don Miller: Innovations in biotechnology are evolving at the speed of light. In fact, astonishing advancements in biotech have transformed the way we practice medicine. Leading-edge biotech products and breakthroughs are literally saving thousands of lives every day. Read more…
Todd Shriber: One of my favorite themes is back in the headlines. That being correlation of various sectors and asset classes to the S&P 500. Previously, I’ve been strident in my opposition to blaming ETFs for this scenario and I see little in the way of compelling evidence to make me change my mind. Read more…
One momentum strategy that an investor could implement would be to purchase the best returning US sector ETF(s) over the trailing 3, 6, and 12 months. This strategy has been written about extensively by Mebane Faber, author of The Ivy Portfolio. Read more…
Earnings season looks more like flu season as sneezing health care stocks sickened the performance of exchange-traded funds.
During the five trading days that ended Thursday, the 79 health care ETFs we track lost 2.9%, on average. The only exception was the ProShares UltraShort Health Care Fund (RXD), which sells the sector short to generate an inverse performance. The S&P 500 Index was little-changed during the week.
The worst-performing health care fund was the Rydex 2X S&P Select Sector Health Care ETF (RHM), which dropped 6.8%. The fund’s two largest holdings Johnson & Johnson (JNJ) and Pfizer (PFE) slipped 1.5% and 4.5%, respectively………
…………The ProShares Ultra Health Care Fund(RXL) and the ProFunds Health Care UltraSector ProFund (HCPIX) had the second- and third-biggest declines of the group. Both portfolios aim to track the daily performance of the Dow Jones U.S. Health Care Index with 200% and 150% leverage, respectively.
It’s been rather startling to watch the equity markets make a run at 6 consecutive weeks of gains. Weren’t folks all but promising Dow 5000 back at Dow 6500? Didn’t the S&P 500′s 666 mark seem so ominous… that the index appeared destined for 500?
Scores of bears haven’t thrown in the towel. And pullback believers, including myself, are almost praying for a bit of profit taking. (Nothing truly wonderful ever seems to come from straight-line upward movement, just as nothing apocalyptic ever seems to come from free falling markets.)
Yet with Noubini predicting the S&P 500 to bottom at 600 as well as predicting the economy to be stuck in recession throughout 2010, market doom-n-gloom doesn’t seem quite as ”doomy-n-gloomy.” Fits and starts… sure. Retesting and rethinking… it seems quite probable. But the idea of breaking the March lows feels less likely than setting higher lows in the 700s for the S&P.
Regardless of how it all shakes out, one has to question what happened to the health care sector. In the bear’s 18-month reign of terror, health care had arguably held up the best. Take a look at Vanguard Health Care ETF (VHT) versus ETF sector funds like Tech (XLK), Energy (XLE), Consumer (XLY), Utilities (XLU) and Materials (XLB).
…Traditionally, health care has been viewed as a defensive sector, meaning that health care sector stocks have held up better than the overall stock market during major bear markets. The current bear market is no exception. Regardless of what the market is doing, people tend to maintain their health care spending, and profits in the sector hold. Because senior citizens account for a disproportionate share of health care expenses, Medicare guarantees a flow of revenue to the health care industry.
There are literally dozens of health care ETFs, and not all are created equal. The first group to be aware of is the broad U.S. health care sector ETFs: Health Care Sector SPDR (XLV) from State Street Global Advisors of Boston, iShares Dow Jones U.S. Healthcare Sector Index ETF (IYH) from Barclays Global Fund Advisors in San Francisco, a subsidiary of Barclays Global Investors of Jersey City, N.J., and the Vanguard Health Care ETF (VHT) from The Vanguard Group Inc. of Malvern, Pa.
The investment performance of these ETFs has been similar over the past three and five years, with the Health Care Sector SPDR just a bit weaker than the others. On the other hand, the Health Care SPDR is the most heavily traded of the three broad health care ETFs, so if you are looking to move more than 1,000 shares at a time, there is a potential advantage to using the Health Care Sector SPDR, especially if you are an active trader.
All three of these broad sector ETFs have the same principal holdings: large pharmaceutical and equipment companies such as Johnson and Johnson, Pfizer Inc., Abbott Laboratories, Merck & Co. Inc. and Amgen Inc.
However, the Vanguard Health Care ETF does not hold the same portfolio as the well-regarded Vanguard Health Care Fund (VGHCX) which, unlike the ETF, has a minimum holding period of one year.