For the bulk of this year, XLV was the second-best of the nine sector SPDRs behind the Materials Select Sector SPDR (NYSEArca: XLB), but XLV has recently nudged ahead of its materials rival. XLV, the largest healthcare ETF by assets, is up 6.1% year-to-date, making it the best of the nine SPDRs.
Strong earnings results will support the healthcare sector’s rising prices. Healthcare companies reported organic growth of all sectors, including 11% revenue growth and 22% earnings growth over the fourth quarter. Looking ahead, S&P Capital IQ projects S&P 500 healthcare earnings per share to rise 8.9% in 2015 year-over-year, compared to a 1.7% gain in the broader blue-chip index. [Healthcare Services ETFs Strengthening on Larger Client Base]
“Sales and profit growth are forecast to decelerate this year in the wake of tough comps for 2014. Nonetheless, P/E multiples have risen considerably over the last three years as the Health Care sector has been revalued by investors, and multiples now exceed their pre-crisis levels. Higher share prices have in turn diminished the sector’s attractiveness to about average in our opinion,” according to AltaVista.
Health Care Select Sector SPDR
