Drug Stocks Finally Make Their Move
March 29, 2011 1:01 PM
(TheStreet) -- Drug stocks such as Johnson & Johnson (NYSE: JNJ) and Gilead Sciences (NASDAQ: GILD) have been beaten up in the year since the health-care reform bill was passed. That may soon change, as fund managers are pouncing on shares of undervalued companies.
Over the past year, the S&P 500 Index has climbed 13%, while the Health Care Select Sector SPDR (NYSE: XLV), which counts Johnson & Johnson and Pfizer (NYSE: PFE) among its top holdings, has risen only 2.5%.
The health-care reform bill, signed into law on March 23, 2010, is mostly to blame for the decline in health-care stocks. With uncertainty looming over provisions in the Patient Protection and Affordable Care Act slated to become effective each year through 2015, related stocks have been brutalized by investors put off by the increased risk. WellCare Health Plans (NYSE: WCG), for instance, tumbled more than 20% last year while the broader market was up about 15%.
