The benchmark ETF in the space, XLV (SPDR Health Care Select Sector, Expense Ratio 0.15%, $16.6 billion in AUM), traded as low as a $65 handle briefly prior to Trump’s election, and has literally been a roller coaster ride since, trading all the way up through $71 immediately following the election before dipping back to the mid-60s. It’s then gone on a phenomenal winning streak through the entire month of February to the present day.
Today XLV is trading at a new 52-week high after all of this short-term volatility and has attracted a notable over $1.6 billion in new assets via creation flows year-to-date. Being a diversified Health Care fund, the ETF holds positions in Pharmaceutical Manufacturers, Health Insurers, Biotechs, as well as Medical Device manufacturers, and the top holdings are currently as follows: 1) JNJ (11.42%), 2) PFE (7.13%), 3) MRK (6.33%), 4) UNH (5.76%), and 5) AMGN (4.32%).
JNJ notably has been on a tear lately as well, also trading not only near a 52-week high, but near an all-time high. Optimism about tax cuts that would be favorable on a corporate level to the Healthcare industry certainly seems to be outweighing concerns about prescription drug costs coming down, as we recall on several occasions not only going back to last November, but in several months preceding the election. Back then, when the candidates, primarily Hillary Clinton, would speak about reducing prescription pill costs, the general effect was that Pharma stocks would get hammered on the rhetoric alone.
Such is not the case lately, as even when President Trump mentions that drug prices must come down, the sector, as evidenced by a chart in XLV or any of its competing funds, continues to march on regardless.
This week, we have seen options players positioning for additional potential upside in XLV, as the April 77 calls have traded more than 200,000 times versus scant open interest in this line prior to this trading. Thus, given the presence of XLV call buyers here in the short term, we are also closely watching CURE (Direxion Daily Health Care Bull 3X, Expense Ratio 0.95%), which is a daily leveraged product that has become somewhat popular with traders and portfolio hedgers who are getting used to the jolt of volatility that the sector has experienced in the past six plus months.
The Health Care SPDR ETF (NYSE:XLV) was trading at $76.08 per share on Wednesday afternoon, up $0.44 (+0.58%). Year-to-date, XLV has gained 10.36%, versus a 6.38% rise in the benchmark S&P 500 index during the same period.
Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.
Paul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.
He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.