“Why has the health-care sector done so well? Some of it relates to low valuations in 2009 and 2010 of pharmaceutical stocks, which make up anywhere from 40% to 45% of the sector. At that time, investors worried about the impact of U.S. health-care reform and a wave of major patent losses that peaked in 2012,” according to Morningstar.
Morningstar also highlighted the Vanguard Health Care ETF (NYSEArca: VHT) as another healthcare ETF to consider as the sector rallies on rampant mergers and acquisitions activity and favorable FDA news.
“VHT holds 323 health-care stocks, while XLV is a much more concentrated portfolio representing just 56 companies. VHT also dips further down the market-cap ladder than XLV, devoting 14% of assets to mid-cap firms and 7% of assets to small-cap companies. XLV, by contrast, invests just 7% of assets in mid-cap health players and has no small-cap allocation,” notes Morningstar.
Since the March2009 market bottom, XLV and VHT have surged an average of 279%. Investors have allocated $595.2 million in new money to XLV this year and $519 million to VHT.
Health Care Select Sector SPDR
