Tags: Investors | flock | healthcare | stocks

WSJ: Investors Flock to Healthcare Stocks

By    |   Monday, 09 June 2014 10:00 AM

Investors are snapping up the shares of healthcare companies, as Obamacare, the aging of the baby boomer generation and a growing middle class in emerging markets are expected to generate growth in the sector.

The industry's stocks are faring better than the overall market. Healthcare shares in the S&P 500 produced a total return of 8.2 percent so far this year through June 6 and 25 percent for the 12 months through then. That compares with 6.4 percent and 22.7 percent for the entire S&P 500.

"Love it or hate it, the Affordable Care Act . . . has created coverage for a lot more folks, and therefore created a lot more customers for a number of companies in the healthcare business," Joe Heider, a partner at Rehmann Financial, tells The Wall Street Journal. http://online.wsj.com/articles/the-case-for-health-care-stocks-1402082325

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Heider's clients have bought drug titans Bristol-Myers Squibb, Eli Lilly, Johnson & Johnson and Merck in recent years.

U.S. healthcare mutual funds enjoyed a $6.91 billion inflow in the year ended April 30, and U.S. healthcare exchange-traded funds took in $6.97 billion during that period, according to research firm Morningstar, The Journal reports.

But not everyone believes Obamacare will help the sector.

Brad Evans, co-portfolio manager of the $1.2 billion Heartland Value and the $3 billion Heartland Value Plus funds, thinks healthcare stocks are overvalued.

According to FactSet, the price-earnings (P/E) ratio for healthcare stocks has increased 4 percent to 21 in the past year, with the P/E for the S&P 500 has increased 2 percent to 17.

"The excitement around the group is driving a lot of merger-and-acquisition activity, which is being transacted at very, very high multiples, which are hard to understand," he says.

Gina Sanchez, founder of Chantico Global, sees other problems with the sector.

"We are seeing a shift in healthcare costs from companies to consumers," she tells CNBC and Yahoo's Talking Numbers.

"Seeing that we have a weak consumer, that might not necessarily be a great thing for the healthcare market."

Editor’s Note: 5 Shocking Reasons the Dow Will Hit 60,000

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InvestingAnalysis
Investors are snapping up the shares of healthcare companies, as Obamacare, the aging of the baby boomer generation and a growing middle class in emerging markets are expected to generate growth in the sector.
Investors, flock, healthcare, stocks
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2014-00-09
Monday, 09 June 2014 10:00 AM
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