A Cheap ETF Sector Play

  • Unloved ETF healthcare segment may provide a cheap opportunity for bargain hunters
  • SPDR S&P 500 ETF (NYSEArca: SPY) is up 0.8% so far this year
  • Investors may also be trying to catch a falling knife after the huge sell-off in the biotech sub-sector as biotechs remain in bear market territory

Healthcare stocks, notably biotechnology names, and related exchange traded funds are the worst performing market sector of the year, lagging the broader equity rally in recent weeks. However, the unloved segment may provide a cheap opportunity for bargain hunters.

Year-to-date, the Health Care Select Sector SPDR (NYSEArca: XLV) decreased 6.9%, iShares U.S. Healthcare ETF (NYSEArca: IYH) fell 7.6%, Vanguard Health Care ETF (NYSEArca: VHT) dropped 8.5% and Fidelity MSCI Health Care Index ETF (NYSEArca: FHLC) declined 8.7%. In comparison, the SPDR S&P 500 ETF (NYSEArca: SPY) is up 0.8% so far this year.

Weighing on the health care industry, election year uncertainty has hit the sector, reports Tom DiChristopher for CNBC.

Both Democratic presidential front runner Hillary Clinton and GOP hopeful Donald Trump support the right for the government to negotiate Medicare drug costs. Additionally, Clinton has previously stated she would tackle “price gouging” from drugmakers if she is elected. [Clinton Delivers Poison Pill To Biotech ETFs]

Smead Capital Management CEO Bill Smead told CNBC, though, argues that investors are missing a buying opportunity in the health care sector as the area lags behind the broader equities market.

“We’re large cap value people. We want to buy meritorious, wonderful companies when everybody else hates them, and I certainly say they hate health care right now,” Smead added.