The healthcare sector is catching some flack, and rightfully so. For the three years ending October 15, the S&P Health Care Select Sector Index returned just 22.9%. In that same time frame, the S&P 500 surged 92.5%. Over those three years. investors could have done significantly better with other defensive sectors, such as consumer staples and utilities. In fact, the S&P Utilities Select Sector Index beat its healthcare counterpart by better than 2-to-1 over that period. Add it all up and it’s not surprising some market participants are ignoring large-cap healthcare names. Glossed-over corners of the market have a way of rebounding before many investors notice indicating risk-tolerant traders may want to remain mindful of the Direxion Daily Healthcare Bull 3X ETF (CURE). The fund aims to deliver 300% of the daily performance of the aforementioned S&P healthcare index.
Answer the CURE Call
Traders consider short-term dances with CURE should note the index the ETF it’s linked tp isn’t entirely devoted to pharma stocks. Rather, it’s home to health insurance providers and medical device makers as well as blue-chip pharma fare.
However, many legacy large-cap stocks have been among the obvious drags on the healthcare sector in recent years — so much so that some of those stocks now sport obvious value traits. Bristol-Myers Squibb (BMY) merits inclusion in that conversation. It’s an example of a pharma name that has rebound potential. And that means it could also be a catalyst for CURE.
“Bristol is aggressively repositioning itself to expand through challenging patent losses for drugs representing 47% of its 2024 sales, including cancer drugs Revlimid and Pomalyst, by 2026, and cardiovascular drug Eliquis (marketed with Pfizer) in 2028,” said Morningstar analyst Karen Andersen. “The 2019 Celgene acquisition moved Bristol deeper into blood-related disease, which tends to be an area with strong drug pricing power and should help Bristol in a time when both governments and private payers are pushing back on drug prices.”
Strong Returns on Invested Capital Over Long Term
Count Merck (MRK), the sixth-largest holding in the index CURE tracks, as another pharma name with value traits. It’s one with the ingredients needed to shake out of the 2025 funk that’s seen the stock decline by nearly 16%.
“Merck’s combination of a wide lineup of high-margin drugs and a pipeline of new drugs should ensure strong returns on invested capital over the long term,” added Andersen. “While we expect the firm could see sales declines in the late 2020s as patents in core oncology drug Keytruda expire in the US, it is likely that pipeline launches will limit these declines to a roughly two-year period during 2029-30. On the pipeline front, after several years of only moderate research and development productivity, Merck’s drug development strategy is yielding important new drugs.”
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