- Week Ahead: Investors Go for Quality, Assess Recovery
- Friday Preview: 'Risk Trade' Stalling; Dollar Watch Continues
- Jobless Claims, Wal-Mart Earnings to Sway Sentiment Thursday
- Major Retail Earnings in Focus Ahead of Shopping Season
- Look Ahead: 'Risk On' Sentiment Could Fuel Rally Further
- Week Ahead: Stocks Search for Catalyst in Quiet Week
- Unemployment May Crack 10%, Job Losses to Bottom
- Look Ahead: Choppy Trade Likely, Cisco to Boost Techs
- Will Fed Change Its Tune?
- Tuesday Preview: Stocks to Seesaw, Economy in Focus
RSS FEED
MOST SHARED
- U.S. May Wind Up Green With Envy
- Japan Third Quarter GDP Jumps; 2010 Growth May Slow
- Warren Buffett to CNBC: 'I Haven't Bought American Express In Years'
- Analysis: APEC Nations Back Face-Saving Climate Plan
- The Cost of Thanksgiving Dinner 2009
- Dipping Into Green Investing
- For Investors, The New Green Looks To Be White
- Disaster Film '2012' Drowns Rivals at Box Office
- CNBC Video: Warren Buffett & Bill Gates - Keeping American Great
- Sustainability Indices Sprouting Up
- CNBC Video: Warren Buffett & Bill Gates - Keeping American Great
- U.S. Stocks Rally for the Second Straight Week
- Dollar is Not Plunging—So 'Calm Down': Market Strategist
- Strategists Say Markets Have More Upside — But How Much?
- Hirschhorn: Risk-Averse Traders
- Roginsky: A Funny Thing Happened on the Way to Financial Reform
- This Year's Biggest Thanksgiving Leftover: Cash
- TV Series Inks Unique Deal For Fight
- First Time Buyers Rescue Housing: Realtors
- Japan Third Quarter GDP Jumps; 2010 Growth May Slow
- Analysis: APEC Nations Back Face-Saving Climate Plan
- Shift Into High-Quality Stocks Could Move Market Higher
- Drug Study Questions Effectiveness of Merck's Drugs
- Military Arms Race Dominates Dubai Air Show
- Buffett: I Haven't Bought AMEX Shares in Years
- Disaster Film '2012' Drowns Rivals at Box Office
- Cities With the Most Home Price Reductions
- Cramer: 5 Earnings Reports to Watch Next Week
Market Insider
Text Size 
Health care stocks have been the stealth performers, and they will likely continue to outperform because of steady earnings, a favorable macro environment and cheap valuations, says Merrill Lynch's Brian Belski.
Belski, U.S. sector strategist, has been recommending overweight in health care, along with IT, and consumer staples. Today, he issued a note on the health care group, calling it a "safety net." He says it's the only sector to show positive price performance of the past three months with over a 1 percent return.
In fact, the group is today's top performer, with the S&P health care group up 0.61 percent in a mostly down market in late morning trade. Top performers today include Humana [HUM
Loading...
()
], Cigna [CG
Loading...
()
], Aetna [AET
Loading...
()
], Wyeth [WYE
Loading...
()
], Amgen [AMGN
Loading...
()
], Bristol-Myers [BMY
Loading...
()
] and Johnson and Johnson [JNJ
Loading...
()
]. Health care has consistently been pointed out by strategists over the past couple months as a good area to mine because the valuations are so low.
"While we acknowledge the sector has been "cheap" for quite a long time, we would also note that levels have not been this low since 1994, a period that preceded a major wave of consolidation and renewed growth within the sector," Belski wrote.
Belski said in 1994 it was pharmaceuticals that were involved in mergers but this time consolidation will be focused on medical devices, biotech and life sciences industries.
Health care's performance after the 1994 trough outpaced the S&P significantly. After one month, it was up 10.9 percent, to the S&P's 3.9. After three months, it was up 14.5 percent to S&P's 3.1 percent. Twelve months later health care was up 46.6 percent, to the S&Ps 22.7 percent, according to Merrill Lynch.
Belski points out health care is one of the few areas that has had double digit earnings growth over the last couple quarters and it will still grow moderately in coming quarters.
"Political rhetoric" is fading for now, Belski said. We know it overshadowed the group this election year, particularly during the primaries. It is now "taking a back seat to other pressing issues like the Economy, Energy, Housing and the U.S. interventions in the Middle East, in our view," he wrote.
He also says pricing is improved in several areas, especially pharma, and that employment trends favor the sector.
Health care should also benefit as the earnings power of recent market leaders, like energy and materials, slows. Investors have changed their focus to stocks that will show consistent earnings growth, he said.
Merrill's picks in the group include Celgene [CELG
Loading...
()
], Johnson and Johnson, Medtronic [MDT
Loading...
()
] and Thermo Fisher [TMO
Loading...
()
]. (Merrill or its affiliates are market makers in these stocks and the firm has or could have a business relationship with them.)
Questions? Comments?
- Where, what, how.
- Warren Buffett and Bill Gates spoke to Columbia students, and Buffett made the students a startling offer.
- For the chief of cable company Comcast, growth has been about making deals – generally very large deals.
- Some companies may start using insurance to shift carbon risk from their balance sheets to maybe... yours?
- The president and founder of Genesis Today wants to improve America’s health, and thinks Wal-Mart can help.
- Switzerland's privacy watchdog is taking legal action to force Google to make changes to its Street View service.
Data is a real-time snapshot *Data is delayed at least 15 minutes