As measured by the S&P 500 Growth and Value indexes, growth stocks are trouncing their value counterparts this year. On a year-to-date basis as of August 28, the gap between those two benchmarks is 1,000 basis points in favor of the growth index. Healthcare stocks are among the drags on the value universe this year with the cap-weighted version of the S&P 500 Health Care Index saddled with a modest year-to-date loss.
However, the sector has recently shown signs of life, indicating the Invesco S&P 500® Equal Weight Health Care ETF (RSPH ) could be an exchange traded fund to watch into year-end.
The equal-weight RSPH is sporting a slight year-to-date gain. But it’s displayed some momentum over the past several months. This indicates that healthcare could be a contributor to a possible value resurgence.
“Among value stocks, names from the financial services, healthcare, energy, and technology sectors have led gains for the second half of the year so far. At the industry level, general drug manufacturers and diversified insurance companies have been the leading contributors,” according to Morningstar.
RSPH Could Be Late 2023 Winner
The $996.1 million RSPH follows the S&P 500® Equal Weight Health Care Index and holds 66 stocks. About a third of its roster is allocated to stocks with the value designation. That makes it a relevant ETF in the value conversation. Conversely, approximately 24% of its holdings are labeled growth stocks.
Count AbbVie Inc. (ABBV) as among the RSPH components that appear undervalued today – a noteworthy assessment when accounting for the stock’s quality traits. That stock was the leading contributor to the Morningstar Value Index’s resurgence since June, notes the research firm.
Biotech giant and member of the Dow Jones Industrial Average Amgen (AMGN), also an RSPH holding, has been contributing to the recent value rebound, too.
“Multinational biopharmaceutical company Amgen has made the second-largest contribution. (Up 17% for the period and now in fairly valued territory.),” added Morningstar.
In addition to healthcare, the other traditional value sectors are energy and financial services. But it might be healthcare that’s best positioned to outperform over the next several months. The group doesn’t possess the economic and interest rate sensitivity of financial services. Nor are healthcare’s fortunes determined by volatile energy prices, which could be damped if the global economy slows.
Additionally, RSPH member firms are supported by favorable demographic trends. And they have cleaner balance sheets than some other defensive and value sectors. And potentially better propensity to increase dividends.
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