While some may warn of the potential bubble forming in the healthcare space, other market observers argue that a broad selloff similar to the bursting tech bubble will be unlikely as health care spending is a growing component of the U.S. economy, according to Randy Gwirtzman, co-portfolio manager of the Baron Discovery fund. [Innovators to Support Healthcare Sector, ETFs’ Growth]
The healthcare sector is expected to make up 19.9% of U.S. gross domestic product by 2022 from 17.1% in 2013, according to the Office of the Actuary at the Centers for Medicare and Medicaid services. Meanwhile, economists project the economy to expand 2.4% this year.
Additionally, some money managers are shifting away from pricier biotech names in search of cheaper areas in the healthcare space. For instance, Matthew Kaufler, a portfolio manager of the Federated Clover Value fund, has been acquiring healthcare services companies as a play on the aging baby boomer generation. ETF investors can also target this segment of the healthcare space through the iShares U.S. Healthcare Providers ETF (NYSEArca: IHF) and SPDR S&P Health Care Services ETF (NYSEArca: XHS). [Healthcare Services ETFs Strengthening on Larger Client Base]
For more information on the healthcare sector, visit our healthcare category.
Max Chen contributed to this article.