The healthcare sector, the third-largest sector weight in the S&P 500, has been scuffling a bit this year thanks in large part to struggles by biotechnology stocks, healthcare exchange traded funds of several different varieties have encountered stumbling blocks.
The silver lining is that healthcare has been one of the most beloved sectors during the current bull market, meaning many market observers see the group’s recent pullback as an opportunity to add to or initiate positions in healthcare stocks or ETFs such as the Health Care Select Sector SPDR (XLV) .
Related: Healthcare ETFs Ready to Rally
For XLV and rival healthcare ETFs, the good news is that the U.S. economy 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.
“As for his favorite sectors, Wells Fargo Chief Equity Strategist John Manley said he likes health care best due to the aging population and large amounts of government money coming into the sector. Following health care, he is a big fan of technology stocks, primarily those that connect businesses,” reports TheStreet.com.
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Related: Good News for Healthcare ETFs
VHT provides similar exposure to XLV, except the Vanguard option includes a broader 340 component holdings, compared to XLV’s smaller 58 stock portfolio. Additionally, VHT has a cheaper 0.09% expense ratio, compared to XLV’s 0.14% expense ratio. However, the Vanguard Health Care ETF is much less actively traded, showing an average daily volume of about 300,000 shares, according to Morningstar data.
Alternatively, investors who want to specifically target these areas may also look to ETF options like the iShares U.S. Medical Devices ETF (IHI) or SPDR S&P Health Care Equipment ETF (XHE) . Both IHI and XHE are comprised of medical devices and health care equipment stocks.
While biotech and pharmaceuticals stocks have flailed this year, medical device makers have been one of the sturdier corners of the healthcare sector.
For more information on Healthcare ETFs, visit our Healthcare category .
Health Care Select Sector SPDR
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.