sourabhsobti's  Instablog

Healthcare and biotech stocks have not only been resilient but outperforming the S&P 500. As shown in chart below, S&P Health Care has risen by 10%, NASDAQ Biotech by 14% as compared to 3% for S&P 500 in past 1 year, reiterating healthcare sector's importance in defensive and growth portfolios.

(Source: Yahoo Finance)

Even though industry faces top line pressure due to:

- Governments across the globe forcing companies to reduce prices.

- European austerity measures leading to price cuts

Regulatory authorities on both sides of Atlantic are getting more industry friendly, with FDA approving 32 new drugs highest in this decade, while EMEA gave Market Authorization Approval for 23 new drugs. Industry's decade long focus on oncology drugs is finally bearing fruit, with drugs available to cure disease such as melanoma

Also under the new law, all Americans with taxable income must have minimal health insurance by 2014 or pay a tax penalty that begins at $95. This provision ensures that all who can afford, pay a share of the costs, as the use of healthcare services by uninsured individuals is estimated to be ~$110 billion, which is shouldered by tax-payers and enhanced insurance premiums.

Reduction in corporate tax rate and record increase in number of drug approvals in 2011 will further contribute to 2012 earnings.

Value investors- stay long on healthcare and biotech stocks.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.