Healthcare Sector Is Steady and Attractive Now | ETF Trends

Many view the healthcare sector as a prime destination for investors seeking quality attributes and steadiness. While the group is scuffling a bit this year, those traits remain intact.

In fact, some market observers believe that the sector’s 2023 struggles coupled with the aforementioned positive characteristics make it worth examining today. That could be good news for exchange traded funds such as the Invesco S&P 500® Equal Weight Health Care ETF (RSPH).

RSPH has some benefits to offer investors that are looking to add to or initiate long-term healthcare positions. One of those perks is enviable history. Healthcare stocks have established track records of performing well across a variety of economic environments. This indicates that this year’s lethargy is more exception than rule.

“The sector has a history of stability and outperformance during periods of both recession and inflation, as healthcare demand has historically held firm regardless of economic conditions,” according to BlackRock. “Over the last seven recessionary periods in the U.S., healthcare outperformed the broader market by an average of 10%.The sector also has demonstrated relative resilience during inflationary episodes.”

Other RSPH Benefits

Another primary benefit offered by RSPH is that it is an equal-weight ETF. This means the Invesco fund is less dependent on slower-moving, blue-chip pharmaceuticals companies than cap-weighted competitors.

Yes, those companies, of which plenty reside in RSPH, have impressive quality attributes, including rising dividends and strong balance sheets. However, they aren’t as “growth” as some other healthcare industries. That’s pertinent because the sector has more of a growth feel than many novice investors realize.

“We view healthcare as a long-term, structural growth sector driven by global aging trends,” added BlackRock. “And we see opportunities to invest in a wide variety of companies, ranging from large to small and from stable to innovative. It’s this prospect of diversification ― as well as the global nature of the sector ― that makes healthcare a sector for all scenarios, in our view.”

Unlike technology or communication services, healthcare investors don’t have to pay up to harness this group’s growth prospects. On a related note, it should be acknowledged that roughly 27% of RSPH’s 66 holdings are classified as value stocks.

“Healthcare stocks are not expensive today and, in fact, are priced below the broader market. Slowing economies call for the resilience that healthcare companies can offer, yet the sector remains at a 10% discount to global equity markets compared to an average premium of 3% over the past two decades,” concluded BlackRock.

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