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The 3 Best Sectors to Buy for 2014

The best stocks to buy for the coming year should come out of these three slices of the market

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Best Sector #3: Healthcare Stocks

best-stocks-to-buy-2014-healthcare-stocks-xlvHealthcare stocks took off in 2013, in large part due to anticipation of the Affordable Care Act (aka Obamacare) opening up new “customers” to many healthcare providers. As a result, the Health Care SPDR (XLV) exploded by about 37% — dramatically outpacing even the impressive 25% gains for the S&P 500.

But don’t think healthcare will be cooling off in 2014. The fact is that Obamacare hasn’t rolled out in full force and has experienced some delays in implementation. Furthermore, the demographic pressures from the baby boomer population will continue to create more demand for prescription drugs, medical devices and other treatments as the American population ages.

Two of my favorite plays in healthcare for 2014 include senior housing REITs, which pay big dividends, and funds that play smaller biotech stocks that could pop big on a buyout or the creation of a blockbuster medication.

The lower-risk value play is senior housing REITs. If you like this route, take a look at Senior Housing Properties Trust (SNH), Ventas (VTR) or Health Care REIT (HCN). All have posted losses in 2013, but their day might come in 2014 — and all pay dividends between 4.7% and of 6.9%.

The growth play is biotech. It’s risky, since stocks that fail to get FDA approval for their treatments could crash and burn, but you can mitigate your risk with broad funds like the iShares NASDAQ Biotechnology ETF (IBB) or the SPDR S&P Biotech ETF (XBI) that cast a wide net. Those funds are up 61% and 46%, respectively, in 2013, so they are a bit frothy, but the potential is still big, and every year you can count on a couple biotechs earning their place as the best stocks to buy.

Jeff Reeves is the editor of and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not own a position in any of the stocks named here. Write him at or follow him on Twitter via @JeffReevesIP

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