This sector boasts both value and growth plays, and one trader says the group is “starting to fire on all cylinders.”
Healthcare stocks have been rallying for the past month, and there’s one trader who says the group is poised to continue higher.
According to founder and CEO of Tribeca Trade Group, Christian Fromhertz, the healthcare sector is the place to be as the market continues rage between value and growth as both the value and growth sides of the sector have been performing well over the last month.
“Market breadth is extremely strong across all equities,” Fromhertz said. “And what we’re seeing… in health care is, really, the group is starting to fire on all cylinders.”
In fact, the XLV S&P 500 Healthcare Sector SPDR ETF—which holds 61 of the S&P’s largest health insurance, biotechnology, pharmaceutical, equipment, medical device, and life sciences stocks—is up 4.38% over the last month, outpacing the S&P 500’s return of 3.35% over the past month.
Fromhertz said one thing that has made him even more bullish on the XLV is its performance relative to the high-growth IHI U.S. Medical Devices iShares ETF. According to him, the recent uptick in the ratio between the two means the broader healthcare sector is catching up to one of its best performing sub-sectors, which is good news for the near term.
“The whole group is starting to shift up. What I like about the ETF … [is] it captures both value and growth in there,” Fromhertz said. “So, really, as we’re seeing a see-saw back and forth between the two, I think this is a great way to play it.”
While Fromhertz says the XLV gives investors exposure to the broader sector on the cheap, investors looking for healthcare stocks outside of an ETF can look to Merck (NYSE: MRK) and Eli Lilly (NYSE: LLY) on the value side, and Thermo Fisher Scientific (NYSE: TMO) and AbbVie (NYSE: ABBV) on the growthier side.
Thermo Fisher shares are up nearly 2% over the last two days after news broke that it was considering a takeover of molecular testing firm Qiagen. The Dutch company would become one of Thermo Fisher’s biggest-ever acquisitions if completed.
While Eli Lilly shares have struggled since this past April when it pulled cancer drug Lartruvo from the market, but the stock is up 4.5% over the last month and there has been increased insider buying of late, which could mean good things are on the horizon for the company.
And while Merck shares are down from where they were at the start of the month, the recent approval of its Keytruda drug to treat advanced endometrial carcinoma in three countries—the U.S., Canada, and Australia—was called a “groundbreaking early-approval” by SVB Leerink analyst Daina Graybosch.
“With this approval as precedent, we see a clearer path for combination accelerated approval in high-unmet need indications with poor response to anti-PD(L)1 alone,” Graybosch wrote.