The Healthcare sector has continued its streak of outperformance in 2014 as well. While the broader market index, S&P 500, saw a poor start, closing January with three straight weekly losses, the health care sector took the second best performing spot.
Higher merger and acquisition activities, new drug launches, an aging population and increasing healthcare spending are the major factors benefiting this sector.
Moreover, the Affordable Care Act (popularly labeled ‘Obamacare’) is also expected to be highly beneficial for this sector. The Act is expected to boost the number of insured Americans across the country.
More Americans will now be able to afford medicines, which could enhance the sales potential of the drug companies and bode well for the healthcare industry on the whole.
With most of the S&P 500 companies having reported their fourth quarter 2013 earnings, the Healthcare sector has emerged as one of the best performing this season.
The yardstick for this success was the most number of companies beating earnings estimates within a sector. Around 86% of Healthcare companies have reported earnings above estimates.
Given these positive trends, a look at some of the top ranked ETFs in the space could be the way to target the best of the segment with lower levels of risk (see:all the Healthcare ETFs here).
Top Ranked Healthcare ETF in Focus
The Zacks ETF Rank provides a recommendation for the ETF in the context of our outlook for the underlying industry, sector, style box or asset class. Our proprietary methodology also takes into account the risk preferences of investors as well.
The aim of our models is to select the best ETFs within each risk category. We assign each ETF one of five ranks within each risk bucket. Thus, the Zacks ETF Rank reflects the expected return of an ETF relative to other products with a similar level of risk.
For investors seeking to apply this methodology to their portfolio in the Healthcare equities space, we have taken a closer look at the top ranked XHS. This ETF has a Zacks ETF Rank of 2 or ‘Buy’ and is detailed below.