Healthcare stocks are off to a historically strong start this year. After an abysmal 2023, a comeback would be long overdue.
Although it’s only been two weeks of trading, investors seem to be embracing the sector’s possible resurgence. The
S&P 500 Health Care sector
index is up 3% as of the close of trading on Jan. 12, while the
S&P 500
is nearly flat.
Not only is it a notable reversal from last year—when the broader market notched a 24% gain while the healthcare notched ticked up 0.3%— but it’s also one of the sector’s best starts to the year in three decades, according to Goldman Sachs’ Asad Haider, in a note published Tuesday. Flows into healthcare funds have been stronger than into funds tracking any other S&P 500 sector, the healthcare analyst writes.
In addition, last week’s major healthcare investor conference in San Francisco, hosted by J.P. Morgan, saw a bit of M&A activity, and generally a more upbeat attitude than last year’s grim and rainy affair.
Investors, however, have shown some specific preferences in their recent healthcare stock buying spree. While U.S. pharmaceutical stocks and large-cap biotech stocks are outperforming the S&P 500 so far this year, according to Haider’s Monday note, managed-care stocks and contract research companies have lagged behind.
To understand where healthcare investors are looking in 2024 after skipping out last year, we screened the
Health Care Select Sector SPDR Fund
for stocks that underperformed the S&P 500 in 2023, and have climbed at least 6% in 2024 as of the close of trading on Jan. 12.
The 10 stocks that passed the screen include two that only narrowly underperformed the S&P 500 in 2023: the biotech
Regeneron Pharmaceuticals
and the drug distributor
Cencora,
formerly known as AmerisourceBergen. Another,
Moderna,
dramatically underperformed the S&P 500, dropping about 45% over the course of the year.
Many of the stocks that passed are biotechs, including Moderna, Regeneron,
Amgen,
and
Gilead Sciences.
These names are benefiting from a run-up in biotech valuations, driven by faith in an easing interest-rate environment and a wave of M&A. The
SPDR S&P Biotech ETF
has climbed some 37% since the start of November.
Other companies to pass the screen include
Merck,
which set a record high on Jan. 10, and the medical device company
Medtronic,
plus the managed care company
Centene.
The results of the screen point to a revival in healthcare, particularly focused on improved sentiment around biotech. What remains to be seen is how long into the year this reversal can last.
| Company / Ticker | Recent Price | Market Value | YTD Change | 2023 Change |
|---|---|---|---|---|
| Catalent / CTLT | $49.33 | $8,911 | 9.8% | -0.2% |
| Merck / MRK | 118.63 | 300,611 | 8.8 | -1.7 |
| Viatris / VTRS | 11.68 | 14,012 | 7.8 | -2.7 |
| Cencora / COR | 219.43 | 44,042 | 6.8 | 23.9 |
| Gilead Sciences / GILD | 86.38 | 107,633 | 6.6 | -5.6 |
| Moderna / MRNA | 105.95 | 40,397 | 6.5 | -44.6 |
| Amgen / AMGN | 306.51 | 164,037 | 6.4 | 9.7 |
| Regeneron Pharmaceuticals / REGN | 933.20 | 101,669 | 6.3 | 21.7 |
| Centene / CNC | 78.81 | 42,100 | 6.2 | -9.5 |
| Medtronic / MDT | 87.42 | 116,238 | 6.1 | 6.0 |
Source: FactSet
Write to Josh Nathan-Kazis at [email protected]
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