Tech Sector Make Some Room For The Health Care Sector
The FAANG stocks have carried the Markets the last several years. This year has been no different. The FAANG stocks have dragged the rest of the equity markets higher after fallen into bear market territory in March. Case in point, 45 analysts offering 12-month price forecasts for Amazon.com Inc have a median target of 2,700.00, with a high estimate of 3,000.00 and a low estimate of 1,840.00. Microsoft’s CEO Satya Nadella told investors during their last quarterly earnings that due to COVID-19, they have seen two years’ worth of digital transformation in two months. Case in point, the NASDAQ is now positive for 2020.
The Smart Money tends to rotate into defensive stocks, such as health care, when they start to anticipate a slowdown in the economic cycle. These stocks are often used as a safe haven for investors during a downturn. I talked about this a bit at the beginning of August.
Hedge funds are reaching record levels of exposure to healthcare stocks as the coronavirus pandemic rages on, Goldman Sachs said Friday.
The sector sits 10 percentage points overweight across hedge funds compared to the Russell 3000 sector, the bank added, making it the most favored industry among managers. Funds monitored by Goldman are nearly 25% concentrated in healthcare equities, with tech companies following with a 20% weighting.
Biotech stocks have been the biggest beneficiary and reached a 2.8 percentage point overweight through the start of the second quarter. The shift has come at a time where investors are rewarding companies working towards COVID treatments. Moderna, Gilead, and Sorrento Therapeutics have all skyrocketed in recent sessions after boasting positive results in their efforts to produce a coronavirus treatment.
The Health Care ETF, XLV comprises of 95% of companies in the following industries: pharmaceuticals; health care equipment & supplies; health care providers & services; biotechnology; life sciences tools & services; and health care technology. Top holdings include:
Sitting at the top of the list is Johnson & Johnson (JNJ). JNJ is an American multinational medical devices, pharmaceutical and consumer packaged goods manufacturing company founded in 1886. Johnson & Johnson's brands include, but not limited to Band-Aid Brand line of bandages, Tylenol medications, Johnson's baby products, Neutrogena skin and beauty products,
JNJ is one of the most consistent publicly companies out there. The company has paid increasing dividends for 50+ consecutive years. The company even grow its earnings-per-share every year during the Great Recession from 2007 through 2009.
In March, JNJ announced their lead COVID-19 vaccine candidate that they been working on since January and expects to initiate human clinical studies of its lead vaccine candidate at the latest by September 2020, with their first batches of a COVID-19 vaccine in early 2021.
Like the Technology sector, the XLV is back at the tops.
On the daily chart, price has been range bound since mid-April. So a break above the range could be setting up for a bull market trap and a break below the range, could mean a sell off with the overall markets.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
Posted Using LeoFinance
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