Despite Reform Battles, Healthcare ETFs Are Still Appealing

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Includes: IHF, PTH, RYH
by: Tom Lydon

As optimistic economic news continues to appear on our televisions and in newspapers, the healthcare sector and its ETFs have rallied in kind, and for good reason.

Recently, CVS Caremark (NYSE:CVS) reported quarterly earnings and announced a 22.1% revenue growth in its pharmacy services segment and 7.5% growth in pharmacy same-store sales. This is indicative of the medical sector overall, because it’s one sector with year-over-year revenue growth, states Charles Rotblut of Zacks.com.

The medical sector has remained attractive because:

  • There’s growth in the elderly population
  • An increase in diseases and cancer rates
  • People are seeking out ways to live longer and healthier lives

Down the road, the Obama administration’s emphasis on healthcare reform could enable the sector to remain attractive, especially if it results in greater access to prescription medicine. To make the sector even more appealing, political risks that are inherent in the sector have already been priced in as can be seen in relative valuations, Rotblut says.

What’s healthcare costing these days? NPR’s Planet Money is doing a great series on the healthcare industry and where the money goes. It’s worth a listen.

  • iShares Dow Jones U.S. Healthcare Provider (IHF): is up 15.6% year-to-date

  • Rydex S&P Equal Weight Health Care (NYSE:RYH): up 18.2% year-to-date

  • PowerShares Dynamic Healthcare (NASDAQ:PTH): up 4.2% year-to-date

Read the disclaimer, as Tom Lydon is a Board Member of Rydex Funds.

Kevin Grewal contributed to this article.