Finally, we view the defensive nature of the sector as a positive as we enter 2018. The health care sector has often been the beneficiary of market pauses and down moves during periods of uncertainty this year. CFRA is encouraged by the level of clarity that is emerging as 2017 comes to a close and we look to an improved economic environment and strong consumer as key drivers for the market in the year ahead. That said, there does remain some uncertainty in Washington with regard to future policies, investigations and the mid-term election outcome.
As such, we think health care is a great way to diversify a portfolio and protect against uncertainty. We still see health care reform as the key risk to the group, but believe the risk has moderated and will stay contained until later in 2018. Nearer-term, the removal of the individual mandate in the tax bill would likely lead to volatility in the sector. We will continue to monitor these situations as they develop.
For diversified exposure to the health care sector, investors might consider Health Care Select Sector SPDR (XLV), which tracks the S&P 500 health care sector and holds many stocks CFRA views favorably from a valuation and risk perspective. XLV has 33% of assets in pharmaceuticals, 20% in health care providers & services and 20% in biotechnology. For investors that want more exposure to large-cap biotechnology stocks, iShares NASDAQ Biotechnology (IBB) is relatively concentrated in CFRA buy and strong buy recommendations, including Amgen (AMGN), Biogen (BIIB), Celgene (CELG) and Gilead Sciences (GILD).
For more information on the healthcare sector, visit our healthcare category.