Insight & action

A Good Prognosis for Health-Care Stocks

We have a prescription for profits: health care.

With the S&P 500 index merely treading water so far this year, trading profits are proving elusive -- unless you're long health care. It's the single best-performing sector year-to-date.

Health care also has the strongest top line growth of any sector, based on Bloomberg calculations using analyst forecasts.

In other words, health-care stocks are outperforming because health-care companies are generating the highest sales growth. Growth is evenly spread across the sector, as are returns. Health care's top three performers year-to-date operate completely unrelated businesses: drugs, devices and treatment:

Broad-based growth across the sector argues for balanced, or equal-weighted exposure. Whereas most ETFs are capitalization-weighted (meaning larger companies carry a higher weighting in the index), the Guggenheim Healthcare ETF (RYH) is equal weighted. Its top ten holdings account for just 20 percent of the portfolio and include biotech, pharmaceuticals, devices, services and software.

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