Chonlatee Sangsawang
Healthcare Select Sector SPDR Fund ETF (NYSERCA:XLV), which tracks the healthcare sector of the S&P 500, continued a moderate performance in the second year, having gained just 0.4% in 2023 after falling 3.6% in 2022.
Health sector growth of only 0.4% has fallen far behind The S&P 500 gained 24.2%, although it has held up better than three other S&P 500 sectors. The sector has been under pressure during the first 10 months of the year until a V-shaped inflection occurred in the last 2 months of the year driven by gains in biotechnology and medical device manufacturers.
Covid vaccine makers top the list of laggards, with Moderna (MRNA) and Pfizer (PFE) falling about 45%, while Eli Lilly (LLY) tops the list of gainers, having gained about 60% on drugs To lose weight.
Industry performance in 2023
Healthcare equipment and services increased 2.76%, while pharmaceuticals, biotechnology and life sciences lost 1.5% in 2023.
Flows of U.S. stock funds into and out of the healthcare sector have swung wildly from week to week, as investors assessed risks based on the sector's outlook. The healthcare-focused ETF had a net outflow of $4.21 billion.
The sector is often considered a defensive area of the market because some investors believe consumers will continue to purchase healthcare products even in times of uncertainty.
Top 5 drivers in 2023
- Winners: Eli Lilly and Company (LLY) +59%.
- Western Pharmaceutical Services, Inc. (WST) +50%.
- Vertex Pharmaceuticals Incorporated (VRTX) +42%.
- DaVita Inc. (DOS) +41%.
- IDEXX Laboratories, Inc. (IDXX) +38%.
- Losers: Moderna, Inc. (ARNM) -Four. Five%.
- Pfizer Inc. (PFE) -44%.
- Walgreens Boots Alliance, Inc. (AMB) -31%.
- Bristol-Myers Squibb Company (BMY) -29%.
- Insulet Corporation (PODD) -25%.
What analysts expect
SA analysts have a bullish view on the healthcare sector (XLV). Of the 4 analysts surveyed by Searching Alpha in the last 90 days, 3 of them have a Buy rating and 1 has a Hold rating.
Aoifinn Devitt, chief investment officer at Moneta, believes that some of the sectors that have been overlooked all year, such as the utilities and healthcare sectors (XLV), except obesity drugs (NVO) , (LLY), could see profits in 2024.
“We favor investing in our favorably rated healthcare (XLV), industrial (XLI) and materials (XLB) sectors,” according to Wells Fargo’s 2024 investor recommendations. “These high-quality sectors have not followed the pace of the index in this narrow equity rally, but in our view offers attractive relative performance potential between now and the end of next year,” Wren said.
Citi recommends market weighting to the healthcare sector (XLV).
UBS has assigned a neutral rating to healthcare through 2024.
Jefferies analysts are overweight healthcare (XLV).
What quantitative measures say
XLV receives a Hold rating from Seeking Alpha's Quant Rating system with a score of 2.98. This is largely due to a D+ rating in the risk category. The stock also receives a C for momentum. Countering this are high ratings in other areas. XLV receives an A+ for dividends and liquidity and an A for Expenses.
