As a sector, healthcare stocks have a lot to offer in terms of fundamental and technical data that supports ongoing innovation and profitability. The aging baby boomer population combined with an increased focus on affordable health insurance is continuing to promote a focus on new drugs and medical devices aimed to increase quality of life.
From a performance standpoint, the Health Care SPDR (XLV) has significantly and consistently beaten the SPDR S&P 500 ETF (SPY) over multiple time frames. The accompanying table illustrates the differences in average annual return of both funds over the past one, three and five years.
The current list of health care-related ETFs (excluding leverage) now stands at 25. While XLV works well as a large-cap benchmark for healthcare stocks, there are a number of ETFs that track more acute groups of companies — be it industry groups, smaller companies, international stocks, and so on.
Often times these unique ETFs can produce much superior returns when compared to a plain-vanilla index. Being in the right hot stocks at the right time — such as iShares NASDAQ Biotechnology ETF (IBB) return of 66% in 2013 — can lead to a tremendous advantage in your portfolio.
The following funds represent areas of the healthcare sector that have seen the hottest stocks so far in 2014.