Just a dozen ETFs hit record highs on Friday. Extending its 2019 gains to 15%, the iShares US Medical Devices ETF (NYSEArca: IHI) was one of the ETFs hitting all-times on Friday. That as the broader healthcare sector is the worst-performing group in the S&P 500 this year.
Investors have been diving deeper into the sector to gain targeted exposure to industries like medical devices, one of the fastest-growing segments of the broader healthcare space.
Industry observers argue that medical technology companies can tap into increased healthcare spending among emerging economies while the U.S. market has matured and could experience slower growth. Looking ahead, in the years through 2024, spending growth is projected to average 5.8% and peak at 6.3% in 2020.
Some of IHI’s 56 holdings are showing signs of breaking out.
Equity strategist Matt Maley said in a CNBC interview “that his top picks in the sector are Boston Scientific, Danaher and Abbott Laboratories. Danaher and Abbott’s stocks both hit 52-week highs on Friday.”
In order, Abbott Laboratories (NYSE: ABT), Danaher Corp. (NYSE: DHR) and Boston Scientific Corp. (NYSE: BSX) combine for about 20% of IHI’s weight.
What’s Next for the U.S. Economy
There are other catalysts to consider, including that the U.S. economy is moving into the late-cycle phase, overall growth may slow and signs of an economic slowdown could pop up. Consequently, investors may also turn to defensive sectors that are less economically sensitive, such as health care.
“Abbott has established new guidance for 2019. It expects organic sales growth of 6.5%-7.5%, which excludes the impact of foreign exchange. It also expects adjusted EPS of $3.15-$3.25. Based on the updated guidance, we are maintaining our 2019 adjusted EPS estimate of $3.22. We are setting a 2020 estimate of $3.65,” according to Forbes.
Abbott is IHI’s largest holding at 8.80% of the fund’s weight.
“Boston Scientific struck Maley because of its notably positive action in recent months, with shares up over 25 percent since their late-December lows,” reports CNBC. “Danaher’s recent announcement that it will purchase General Electric’s biopharmaceutical business has lifted its stock, which Maley said was ‘breaking out’ regardless of the news.”
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