Despite a lengthy run up in those stocks, broadly speaking, they are not excessively valued.
“Health care service firms trade at a forward P/E of 20.3x, 2% below their 5-year average,” adds Mazza. “The industry is forecasted to have 14% EPS growth over the next 3-5 years, while the rest of the market is projected to be 11%.”
XHS, which is up 11.2% this year and 33.1% over the past year, also offers investors industry exposure to the strong dollar and other prominent investment themes.
“These firms have a low sensitivity to the dollar as they are predominantly domestically-oriented with low percent of foreign sales,” said Mazza. “An aging population transforms health care to be a necessity as more Americans may need extended care as well as ongoing medical services from chronic, but treatable diseases, such as diabetes and obesity.”
SPDR S&P Health Care Services ETF
