Chonlatee Sangsawang
Health Care Select Sector SPDR Fund ETF (NYSEARCA:XLV), which tracks S&P 500 Healthcare sector, continued subdued performance in the 2nd year having gained just 0.4% in 2023 after falling 3.6% in 2022.
Healthcare sector gain of just 0.4% has badly lagged S&P 500 gain of 24.2%, though it has held up better than 3 other S&P 500 sectors. The sector has been under pressure for the first 10 months of the year until a V-like inflection occurred in the final 2 months of the year driven by gains in biotech and medical device makers.
Covid vaccine makers top the laggards list, with Moderna (MRNA) and Pfizer (PFE) down around 45%, while Eli Lilly (LLY) tops gainer chart, having gained around 60% on weight loss drugs.
Industries 2023 Performance
Health Care Equipment & Services rose 2.76%, while Pharmaceuticals, Biotechnology & Life Sciences lost 1.5% in 2023.
U.S. stock fund flows into and out of the healthcare sector have swung wildly from week to week, as investors assessed risks based on the sector outlook. The healthcare-focused ETF had a net outflow of $4.21B.
The sector is typically considered a defensive area of the market because some investors believe consumers will continue buying healthcare products even during uncertain times.
Top 5 movers in 2023
- Gainers: Eli Lilly and Company (LLY) +59%.
- West Pharmaceutical Services, Inc. (WST) +50%.
- Vertex Pharmaceuticals Incorporated (VRTX) +42%.
- DaVita Inc. (DVA) +41%.
- IDEXX Laboratories, Inc. (IDXX) +38%.
- Losers: Moderna, Inc. (MRNA) -45%.
- Pfizer Inc. (PFE) -44%.
- Walgreens Boots Alliance, Inc. (WBA) -31%.
- Bristol-Myers Squibb Company (BMY) -29%.
- Insulet Corporation (PODD) -25%.
What Analysts Expect
SA Analysts have a bullish view of the healthcare sector (XLV). Of the 4 analysts surveyed by Seeking Alpha in the past 90 days, 3 of them have a Buy rating and 1 have a hold rating.
Aoifinn Devitt, Moneta’s chief investment officer, believes that some of the sectors that have been overlooked all year, such as the utilities and the healthcare (XLV) sectors — except for the obesity drugs (NVO), (LLY) — might see gains in 2024.
“We favor investing in our favorable-rated health care (XLV), industrials (XLI), and materials (XLB) sectors,” as per Wells Fargo outline investor recommendations for 2024. “These high-quality sectors have not kept pace with the index in this narrow equity rally, but in our view offer attractive relative performance potential between now and the end of next year,” Wren said.
Citi’s recommends market weight to healthcare sector (XLV).
UBS has assigned neutral rating to Healthcare going into 2024.
Jefferies’ analysts are overweight on healthcare (XLV).
What Quantitative Measures Say
XLV receives a Hold rating from Seeking Alpha’s Quant Rating system with 2.98 score. This comes in large part due to an D+ grade in the category of risk. The stock also receives a C for momentum. Countering this are high grades in other areas. XLV receives an A+ for dividends and liquidity and A for Expenses.