Health Care ETFs After Obamacare (IHF, XLV, UNH, ESRX)
The rocky rollout of Obamacare is in its second month and there are still a large number of uncertainties hanging over the health care industry as a whole.
For starters, the website is still experiencing issues holding back the potential number of people that could be enrolling. Then there is the one-year suspension of the employer mandate and now cancelled plans can be kept for another year.
All in all, the plan has not enjoyed a smooth introduction to the public. However, there is still enough data out there to suggest what the end result may be for some health care sectors. For example, more people with health insurance equals a higher demand for health care services and products, including drugs.
There is one piece of data that is undisputable, the health care stocks are hitting new highs amidst a strong 2013. From pharmaceuticals to hospitals to health insurers, money has been flowing into the various sectors. There is wide range of ETFs that captures exposure to the health care industry for the average investor.
SPDR Health Care Sector Select ETF (NYSE: XLV)
The broad based ETF encompasses several health care sectors with a heavy concentration on the pharmaceuticals and biotechs. A total of 57 stocks compose the ETF with the top three holdings, all pharmaceuticals, making up 29 percent. A closely watched sector is the health care providers, which make up 16 percent of the ETF.
Year-to-date the ETF is up 37 percent, easily beating the S&P 500, and is trading a few days from an all-time high. A pullback to support at the $53 area looks like it could be a great buying opportunity for prospective investors.
iShares U.S. Healthcare Providers ETF (NYSE: IHF)
The basket of 49 stocks is heavily concentrated on health insurance companies as well as pharmacy benefit management firms. The top two holdings make up 24 percent of the allocation. Unitedhealth Group (NYSE: UNH), a health insurance company, is the number one stock in the ETF and is up 34 percent for the year. The number two holding is pharmacy benefit management company Express Scripts (NYSE: ESRX), which is up 23 percent in 2013.
The ETF is a play on more individuals signing up for health care and the health care providers benefiting from the increased volume. Though there are a lot of unknowns to the increase of insured Americans and how the costs will be passed on to the insured in the future. Overall, IHF should be positioned to continue hitting highs as the landscape of the health care industry evolves in the coming hears.
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