Market Overview

Healthcare Sector In An Upward Climb In June


It’s no doubt that more investment opportunities will be created in the healthcare sector as a result of the Affordable Healthcare Act and considering that the sector is outperforming the rest of the overall market. It appears that the sector is primed for a new period of growth.

From cancer therapeutics bigwigs (i.e. Bayer Healthcare Pharmaceuticals - BAYN, Johnson & Johnson – JNJ, and Sanofi - SNY) to smaller niche players (i.e. BioCorRx, Inc.BICX, and Cytomedix, Inc. - CMXI), investing in healthcare/biotech companies have become attractive to investors once again after the sector has bottomed out in spring.

Gainers so far this week include Vertex Pharmaceuticals Inc. (VRTX), which has increased its share pricing by 1.5 percent; Abbott Laboratories (ABT), up by 0.20 percent; and Roche Holding AG (RHBBY), also up by 0.5 percent.

Sizable investments have also been reportedly funneled to health-care mutual funds and ETFs for a year ending April 30. Based on Morningstar data, over $6.91 billion worth of investments have gone into mutual funds while $6.97 billion have gone into U.S. health-care ETFs.

Index-wise, the healthcare sector is on a downward trend since the bitter sell-off in spring when investors turned to defensive stocks (i.e. oil, power), while others focused on consolidation and managing increasing hedging costs. But the sector rallied until the end of first week June, with many of the indices advancing, particularly those trading healthcare and biotech stocks.

Mid-way through last week, the US Markets finished a bit higher, according to a technical snapshot from Globe Newswire. The NASDAQ Composite Index, where most healthcare and biotech stocks are offered, edged up by 0.41 percent to 4,251.64. The same goes for the S&P 500 which saw a 0.19 percent increase to 1,927.88; meanwhile, the S&P 500 Health Care Sector Index closed at 694.30, a 0.23 increase from its previous close, and a 3.81% rise for the whole month. The Dow Jones Industrial Average also soared the same day to 16,737.53, up by 0.09%.

For the past 12 months up to end of May, healthcare stocks trading in the S&P 500 also soared by 24 percent, outperforming the large-cap index’s 18 percent revenue during the same period, The Wall Street Journal reported. Large caps share a large chunk—13 percent, in fact—of the overall market capitalization of the S&P 500.

This week, healthcare stocks on Wall Street slightly dipped by 0.5 percent, according to an independent report on Investors Place. Dow Jones and S&P 500 were still up 0.1 percent, while Nasdaq stayed put.

Obama-care is expected to boost share prices to record levels and fan mergers-and-acquisitions in the industry. The increased healthcare demand from aging baby boomers as well as improved financial conditions and spending in emerging economies are also seen to fuel a rise in healthcare stocks. HMOs, in particular, are destined to grow bigger this year, according to HMO stocks that were reported to see skyrocketing returns in the immediate future include Aetna (AET), United HealthGroup (UGH), and Magellan Health Services (MGLN), to name a few. 

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.


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