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Healthcare stocks

Could Healthcare stocks soar during the Corona crisis?

When looking at the market right now things seems bleak. We are in a pandemic and a panic that is going to change the World as we know it. Meanwhile, stocks have had their hardest sell-off since 1929. The question is where we can look for cover, clarity and new leadership in this mess? Could Healthcare stocks be part of such a sector?

Healthcare stocks have been rallying hard after the big crash in March. Up over 30 percent from their lows, which is a lot more than the S&P 500. And compared to many other sectors they held up well during the crash in March. This suggests that the Healthcare stocks might show strength going forward. Both the technical charts and the fundamentals suggest that some Healthcare stocks might even soar during the crisis.

What comprises the Healthcare sector?

The Healthcare sector includes Biotech, medical equipment, pharmacy,­ industry, healthcare, hospital and caring homes. When looking at how well it is performing it might be smart to look at a few of the following tickers. For example, the Nasdaq Healthcare index (IXH), the Nasdaq biotechnology index (NBI), the SPDR Select Sector Healthcare ETF (XLV) and other Healthcare ETFs.

What are the Healthcare stocks signaling?

From the sell-off in March the Healthcare stocks have been moving strong, on the way up, in the last few weeks. But whether this is a correction in a Bear market, or a new Bull market, remains to be seen. Whether we fall more from here or not remains to be seen. But one thing is for certain. There will be individual names and sectors that will do better than others going forward. And judging by the chart of the Healthcare sector, it might be one of those high-performing sectors.

Looking at the Nasdaq Healthcare index (IXHC) in the picture we see that the Healthcare sector is close to a new breakout, after rallying over 30 percent, from the lows in March. Moreover, it is showing more strength than the S&P 500 index, which is displayed in the picture below. – Chart from TradingView
The S&P has only rallied around a bit over 20 percent, since the March bottom. Quite a lot less than the Healthcare sector. What that could mean is that the market is having high expectations for the healthcare sector, but low expectations for the S&P 500. – Chart from TradingView

Why now?

The strength of the Healthcare industry seems to be propelled by the Corona virus pandemic. There are psychological, technical and fundamental factors behind it. And those factors can be seen in the charts and fundamentals.

The fundamental situation is getting better because of government infusions of money into the sector. Moreover, people are pouring money into these stocks because of new expectations, fear and greed. Emotions that are connected to the pandemic. And this has likely been discounted by the market, which is showing up in the charts.

When to buy the Healthcare sector?

An opportunity to buy the sector came in March, when it dropped. But if the overall market rolls over again, it might create a better opportunity to buy the sector in the months ahead.

How to invest?

The conservative investor could research the healthcare indexes themselves, or the healthcare ETFs. While more aggressive and advanced investors might want to do research on individual stocks.

Sticking with good names

If this market rolls over again, the Healthcare stocks will suffer, along with the rest of the market. Which is why sticking to good names in this sector might be a good alternative. One such example, that I have looked at recently, is the Danish biotech-company Novo Nordisk. Novo Nordisk is a big provider of insulin, for the Diabetes industry and its formation is looking interesting.

Novo Nordisk might be heading into good times again. The chart is looking good, which might be a sign of better fundamentals going forward. The stock looks like it is coming out of a multi-year base, now spanning over five years. – Chart from TradingView

Another interesting stock that has figured in the discussions surrounding alternative Corona treatments is Gilead Sciences. Gilead has the fastest year-on-year earnings growth in the Healthcare sector, among the bigger names.

Gilead Science’s stock chart is interesting and it looks like it is coming close to an old resistance line at the moment. – Chart from TradingView

How to protect yourself

Personally, I am not investing a lot of money into this market yet. Because this market could start to roll over again. And if you don’t have the time to research individual stocks and think out well planned trades in this sector, but still want to buy the Healthcare names, there are a few alternatives. For example, one could Dollar cost average into this sector over time. Although that is of course not personal advice.

Conclusion

What the future holds, for the Healthcare sector, remains to be seen. But there will always be opportunities for the attentive trader who is ready to swing at good pitches. If the Healthcare stocks do well or not remains to be seen. But they are worth looking into because of the factors mentioned in this article. And that’s all.

Disclaimer: I currently have no positions in the names or sectors mentioned in this article. All information found on this site, ideas, opinions, predictions, commentaries are for informational, entertainment or educational purposes only and should not be construed as personal investment advice. While the information provided is believed to be accurate, it may include errors or inaccuracies. I will not and cannot be held accountable for any actions you take as a result of what you read in here. Use the information at your own risk. I am not your investment advisor. Consult a licensed financial advisor before making any investment decisions.

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