Credit: Shutterstock photoEvery week, Marc Chaikin applies his groundbreaking analysis to an ETF or a sector. Today, he looks at S&P Health Care Select SPDR ETF (XLV)
The Health Care Sector has been the market leading sector for the past 12 months. Many of the companies in the Health Care sector, particularly in the managed care group, are big beneficiaries of Obama Care. As recently as yesterday the S&P Select SPDR Health Care ETF (XLV) equaled its 12 month high of 65.31. The market is pulling back again today, but the large capitalization stocks in the S&P 500 Index, while down 1.1%, are once again doing better than the smaller cap indexes.
We view the current weakness as it develops to be a buying opportunity in the Health Care sector. The XLV affords an investment across a broad spectrum of health care stocks. There is strong support from a technical point of view 1-2% below current levels, at 63.20 – 64.00.
The Chaikin Power Bar below indicates that 24 stocks in the XLV have a bullish Chaikin Power Gauge rating while only one stock has a bearish rating. Contrast that to the Chaikin Power Bar for the Energy ETF (XLE), where there are 0 bullish Power Gauge ratings vs. 12 stocks with bearish ratings.
Investors who want to own individual stocks in the Health Care Sector should look to the stocks in the XLV with the strongest Chaikin Power Gauge ratings.
The Chaikin Portfolio Health Check is an excellent tool to help zero in on the strongest stocks in any ETF, and in the S&P Select SPDR Health Care ETF there are a number of bullish rated stocks.
By looking at the individual component stocks through the lens of the 20 factor Chaikin Power Gauge rating, you can easily find the stocks in the XLV ETF with the strongest price potential over the next 3-6 months. These are the stocks to buy, with the added bonus that the strength of the Health Care Sector as a whole puts the wind at your back.
The Chaikin Power Grid in Portfolio Health Check (see below) maps stocks and industry groups from strong to weak so you can easily determine the best and worst stocks in any ETF. To find the strongest stocks in the XLV, we look to the right quadrant of the Power Grid (strong Power Gauge stocks) where we find stocks with the best potential for price gains over the next 3-6 months. There we see stocks like Aetna Inc. (AET), Humana (HUM), United Health Group (UNH), Universal Health Services (UHS) and WellPoint (WLP) with bullish Power Gauge ratings in the strong Medical Care Group.
There are also strong stocks, in the bottom right quadrant, that are in the Biotech/Drug group which has a weak Power Bar rating because of some of the smaller cap Biotech/Drug stocks. Stocks like Gilead Sciences (GILD), Biogen Idec (BIIB) and Amgen (AMGN) have bullish Power Gauge ratings and are strong technically.
Over time, strong stocks in strong industry groups will outperform weak stocks in weak groups.
Gilead is a particular stand out as it has a new hepatitis – C drug, Sovaldi, which has huge potential and the company has been wise enough to allow a generic version of Sovaldi for sale in 3rd world countries, where the high price of a Sovaldi course of treatment would not otherwise be feasible. Use any weakness of 1 ½ to 3 days to buy GILD in accounts looking for aggressive long term growth.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
