Despite an early 2024 rally, healthcare shares continue to lag the broad market. Over the past 12 months, the S&P 500 Index climbed 22.1%; health stocks, a modest 13.5%. Enthusiasm about artificial intelligence (AI) stocks sapped investor attention from defensive sectors, including health.
Healthcare remains an attractive sector, although it doesn't move as one block. On the plus side, an ongoing post-COVID ramp-up in patients getting surgery and treatment is boosting health-facility stocks.
Weight-loss drugs and their potential to treat other ailments could lift earnings for key drug players for years. The sector even has an artificial intelligence angle, from accelerating drug research to precision medicine therapies. And though aging demographics is an old story, it remains a growth driver for the sector.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Why we chose the Health Care Select Sector SPDR ETF
Last month in the Kiplinger ETF 20, our favorite cheap ETFs to buy, we replaced the Invesco S&P 500 Equal Weight Health Care ETF (RYH) with State Street Global Advisor's Health Care Select Sector SPDR Fund (XLV). Both funds hold the same 63 healthcare stocks, but the Invesco fund gives equal stakes to each firm and gained 5.9% over the past 12 months; the SPDR ETF weights each holding by market value and advanced 13.3%.
Size helped over the past year, and we think that trend will continue. Just 15 health stocks beat the S&P 500 over the past 12 months, and most rank among the largest by market cap. Sector heavyweight Eli Lilly (LLY) soared 78% over the past 12 months; biotech giants Regeneron Pharmaceuticals (REGN) and Amgen (AMGN) gained 45% and 46%, respectively.
By contrast, the rest of the sector was a drag. More than 20 stocks lost value over the past year, led by DexCom (DXCM), down 45%, which makes devices for people with diabetes.
Investors can expect the U.S. presidential election to inject some choppiness into health shares. Firms with strongholds in their businesses and heaps of cash on their balance sheets can best navigate that challenge, say BofA Securities analysts.
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
Related content
-
2025 Virginia Tax Rebates Coming Soon? What to KnowTax Rebates Given a historic 2025 gubernatorial race, tax policy will remain a key issue for Virginians in the months ahead.
-
What to Know Before Flying With Your PetFrom documentation and TSA screening to carrier rules and airport relief areas, here’s what to know before taking your pet on a flight.
-
We Are Peter Lynch: How to Invest in What You KnowTake a look around, go to a free stock market data website, and get to work.
-
Trump Tariffs and Taxes: Waiting to See What Happens Is Not a StrategyLike presidents, tariffs come and go. Policy changes also shift about every two years with the election cycle. If you're paralyzed by uncertainty, you could be missing opportunities to benefit your financial future.
-
Is a Family Office Right for You? The Multimillion-Dollar QuestionAs ultra-high-net-worth individuals increase in number, many are turning to family offices to manage their complex finances. Here's how family offices work, courtesy of a finance professional.
-
This Is How a Lot of Law School Students Are CheatingGrowing numbers of students are falsely claiming a learning disability to score more time to take tests. This has real-world consequences in which fellow students, law firms and their clients pay the price.
-
Stock Market Today: Stocks Rise on Less Deadly ConcernsMarkets are forward-looking mechanisms, and it's good when price action shows there's a future to look forward to.
-
Who Will Replace Jerome Powell as Fed Chair?Even if President Trump doesn't make good on threats to fire Chair Powell, the Fed leader's term ends in 2026.
-
If You're Ignoring Private Markets, You're Missing Most of the ActionPrivate markets are becoming increasingly essential for all investors, not just institutions, and they are now more easily accessible thanks to innovative investment structures.
-
Three Ways Women Can Keep Caregiving From Draining Them FinanciallyMany women care for older relatives. While commendable, it could put their retirement at risk … unless they find a way to prioritize themselves.
