A CURE For The Common Earnings Play
It has the potential to be lost in this week's earnings hubbub, which is dominated by growth-ier communication services and technology stocks, but don't sleep on reports from blue-chip healthcare stocks.
What Happened
The sector – the second-largest in the S&P 500 – is worth considering because it's been mostly durable this year and the Health Care Select Sector Index (IXVTR) is one of the sector benchmarks closest to taking out its February highs.
Enter the Direxion Daily Healthcare Bull 3X Shares (NYSE: CURE), the dean of leveraged healthcare exchange-traded funds. CURE attempts to deliver triple the daily returns of the Health Care Select Sector Index.
Why It's Important
The members of CURE's underlying index stepping into the earnings confessional this week aren't glamour names, but in totality, they represent a fair percent of the benchmark, meaning CURE could be in the leveraged spotlight for several days.
Before the bell today, Dow components Merck (NYSE: MRK) and Pfizer (NYSE: PFE) report first-quarter earnings. Those stocks combine for over 11% of CURE's index.
On Wednesday, three smaller members of the Health Care Select Sector Index report followed by Cigna (NYSE: CI) on Thursday and AbbVie (NYSE: ABBV) on Friday.
CURE's index “includes domestic companies from the healthcare sector, which includes the following industries: pharmaceuticals; health care equipment and supplies; health care providers and services; biotechnology; life sciences tools and services; and health care technology,” according to Direxion.
What's Next
Add it all up and approximately 20% of the index CURE tracks reports earnings this week. That at a time when the coronavirus is seen boosting the healthcare sector.
“The US Healthcare sector overall is generally resilient but not immune to the effects of the coronavirus as the pandemic is having operational and financial implications for service providers,” said Fitch Ratings in a recent note. “We maintain a Stable Outlook on the sector as healthcare spending is less economically sensitive than other sectors and expect post-pandemic influence on consumer behavior to be limited; thereby having fewer implications for credit profiles.”
Traders have added nearly $8 million to CURE this month.
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