This 'dead money' sector leads the S&P

Health care is in the index's top spot for first time since 1988 and looks to remain strong.

By Benzinga Mar 25, 2013 12:21PM
By Tim Parker

“This is where money goes to die,” has described the health care sector over the past decade -- but this year, things are different.

For the first time since 1988, health care leads the S&P with a 12% gain—the most among the 10 main groups; specifically, health insurers, biotechnology companies and drug makers.

Pfizer (PFE) is up 9.5% this year. Eli Lilly (LLY) is up more than 12%;  Amgen (AMGN) up 8% and St. Jude Medical (STJ), up nearly 16%. The big winner is Celgene (CELG)—up nearly 40% since the beginning of the year.

But to measure a sector, looking at the ETFs will provide another glimpse, as investors look for confirmation. The SPDR Health Care Services ETF (XHS) is up 11%, the iShares Dow Jones US Pharmaceuticals (IHE) is up nearly 10% and the iShares Nasdaq Biotechnology (IBB) is up more than 10%.

Convinced? Hard as it is to believe it, it’s true. The last time the industry lead the S&P, it finished the year up 42%, compared with gains in the S&P of 27%.

Analyst consensus, according to Bloomberg, is S&P health care companies will climb 8.4% this year, compared to growth of only 0.9% in 2012.

So what’s the deal with health care? Why such gains? First, you can thank Obama, according to industry insiders. Regardless of their political opinions, a lot of people who didn’t have healthcare are about to enter the marketplace, In fact, up to 48.6 million are about to become new customers.

Second, there might be some sector rotation in the mix. While the broad market bull has been on a run, it left health care stocks behind. Now, the sector is catching up and, if that’s the case, there’s still room to run.

Before diving in, there’s room for caution. First, traders know that playing biotech stocks can feel like a day at the casino. Just because Celgene is up doesn’t mean that all of the biotechs are a buy. One bad FDA ruling can slash half of their value, or more, overnight.

Next, if investors assume that some of this rally is due to sector rotation, that means that at some point, there will be a rotation back out. To paraphrase the words of the most interesting man alive, “stay nimble, my friends.”

More from Benzinga: 
Mar 25, 2013 7:26PM
This article is unexpected here, but it is one of the most promising artices for Obamacare interests.
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

123 rated 1
266 rated 2
485 rated 3
660 rated 4
586 rated 5
652 rated 6
640 rated 7
504 rated 8
289 rated 9
159 rated 10

Top Picks

TAT&T Inc9



Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.