Healthcare stocks and the related exchange traded funds are sagging this year, and medical device and equipment makers aren’t an exception to that trend.
However, June could bring better things for stocks such as Edwards Life Sciences (NYSE:EW), and that could be a plus for the Invesco S&P 500 Equal Weight Health Care ETF (RYH). As an equal-weight healthcare ETF, RYH is more diverse than its cap-weighted counterparts.
On a related note, RYH devotes 27% of its weight to healthcare equipment and suppliers stocks — the ETF’s largest industry weight. Conversely, typical cap-weighted healthcare ETFs tend to feature pharmaceuticals stocks as their largest industry allocations. Additionally, historical trends indicate that June could be an ideal time to consider RYH.
“A study put out by Schaeffer’s Senior Quantitative Analyst Rocky White detailing the 25 best performing stocks in the month of June shows EW high on the list. During the past 10 years, Edward Life Sciences stock has enjoyed a positive one-month return nine times, averaging a 5.5% bounce during this time period. A similar move from EW’s current perch would put it just below the $104 level,” according to Schaeffer’s Investment Research.
The research firm’s analysis of the 25 best-performing S&P 500 members in the month of June shows that medical equipment stocks are often the place to be in the sixth month of the year. Ten such names, including some RYH components, are on the list.
Dexcom (NASDAQ:DXCM), another RYH holding, is actually the best-performing S&P 500 stock in June, averaging a gain of 14.39% over the past 10 Junes, according to Schaeffer’s data.
Hologic Inc. (NASDAQ:HOLX), West Pharmaceutical Services (NYSE:WST), and Align Technology (NASDAQ:ALGN) are also on the list, and all three are members of the RYH portfolio. As for the aforementioned Edwards Life Sciences, options data indicate that the near-term outlook for that stock is potentially interesting.
“Finally, EW sports a Schaeffer’s Volatility Scorecard (SVS) of 85 out of a possible 100. This implies Edwards Lifesciences stock has tended to outperform options traders’ volatility expectations of late — a good thing for call buyers,” noted Schaeffer’s.
Pharmaceutical giant Eli Lilly (NYSE:LLY), another RYH holding, is also among the best-performing S&P 500 stocks in June. That healthcare name has averaged a June gain of 3.34% over the past decade.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.