One of the rare market bright spots last year, the U.S. healthcare sector remains a Wall Street darling despite a slow start to 2019.
As 2019 begins, healthcare <.SPXHC> is the most favored of the 11 main S&P 500 sectors, according to a Reuters review of ratings from 13 large Wall Street research firms, which recommend how to weigh those groups in investment portfolios.
Healthcare shares overall rose 4.7 percent last year, one of only two S&P 500 sectors, along with utilities, to post positive returns in 2018 as the benchmark index fell 6.2 percent.
Proponents cite the healthcare sector’s reasonable valuations, strong balance sheets and dividend payments among many companies, as well as the group’s upbeat outlook for earnings, which are less susceptible to economic cycles than other businesses.
If economic growth is slowing, some investors are wary of being too invested in cyclical sectors that thrive during an upswing, but do not want to be too defensive either.
“We are trying to find things that skirt both of those two categorizations, and healthcare is a really nice diversified earnings stream,” said Noah Weisberger, managing director for U.S. portfolio strategy at Bernstein.
Such diversity stems from the variety of companies comprising the sector: manufacturers of prescription medicines, makers of medical devices, such as heart valves and knee replacements, health insurers, hospitals and providers of tools for scientific research.
From a stock perspective, that means the sector includes potential fast-growing stocks, such as biotechs that can carry more risk and more reward, or large pharmaceutical companies and others that offer steadier, slower growth.
Investment advisory firm Alan B. Lancz & Associates sold some pharmaceutical holdings late last year that had posted big gains, such as Merck & Co, to move into biotech stocks it believed were undervalued, said Alan Lancz, the firm’s president.
“We have maintained our overweighting, which is unusual for us with a sector that has outperformed so dramatically,” Lancz said. “But mainly there are segments within the sector that still offer opportunity.”
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.