Just when it looked like technology stocks took over the S&P 500 — another sector is on the rise.
Health care stocks, like Viatris, Catalent and Moderna, are dominating the ranks of top-performing stocks this year so far, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. Six of the top 10 S&P 500 stocks are in the health care sector.
"Health Care has been ripping," said a report from Bespoke Investment Group.
Digging Into Health Care
Optimism over progress on life-changing treatments is powering the health care sector higher. And many stocks are rallying back following disappointing performances in tech-frenzied 2023.
Shares of Viatris are up more than 12% this year, for instance. That makes them the second-best S&P 500 stock after only Juniper Networks, which surged on a buyout bid. Investors like Viatris' broad product treatment pipeline spanning from infectious disease to oncology. And the interest has come on suddenly. Shares fell 2.7% in 2023 while the S&P 500 surged more than 20%.
But it's hardly alone. The Health Care Select Sector SPDR ETF is up 3.3% this year. That makes health care the top performer among the 11 S&P 500 sectors. It's also solidly outpacing the 1.3% drop by SPDR S&P 500 ETF Trust. And the Technology Select Sector SPDR ETF is down 1.1% this year.
"History has shown that once companies reached their top 10 status, their future returns looked a lot different than their past returns," said Mark Hebner, founder of Index Fund Advisors.
Tapping Into S&P 500 Health Care With ETFs
Simply owning the S&P 500 exposes you to the health care sector. But some investors likely would want a larger position if they're bullish.
Health care stocks account for 13% of the S&P 500's market value. That ranks third behind technology at 28.6% and financials at 13.0%. But it's a crowded sector, too, made up of more than 60 stocks. That makes finding the winners tougher. Lab supplies company Charles River, for instance, is down nearly 10% this year as the rest of the sector mostly rallies.
Health care themes can be risky, too. Moderna, on the vanguard of modern vaccines, saw its stock tank 44.6% in 2023. It's up 10% this year, but investors must be prepared for volatility in this sector. Who knows what's next for weight loss drugs in 2024?
"The easiest way to get access to weight loss drug and vaccine stocks is through a broader healthcare ETF like XLV, which has both pharma and biotech holdings but also includes other healthcare industries like providers and equipment," said Vetta Fi's Roxanna Islam.
Finding More Options
The nearly $40 billion-in-assets Health Care Select Sector ETF only charges 0.1% annually. And yet it holds 64 positions, with 55% loaded into the top 10 holdings. Roughly 10% of the ETF is in Eli Lilly stock. Eli Lilly is one of the top S&P 500 stocks this year, up 8.1%. Thanks to excitement over its weight loss drug, Eli Lilly's shares surged nearly 60% in 2023. Another 10% of the ETF is in top-performing health insurer UnitedHealth.
Some investors, though, may want to drill down further into a specific health care industry group like pharmaceuticals, Islam says. And if that's the case, there's the $456 million-in-assets VanEck Pharmaceutical ETF. It charges 0.36%. But it loads up more in the drug industry with larger holdings in some popular drug and vaccine stocks," Islam said.
But right now, health care is showing it can give tech a run for its money.
Health Care Dominates S&P 500
More than half of 2024's top stocks in the sector
| Company | Ticker | Year-to-date % ch. | Sector |
|---|---|---|---|
| Juniper Networks | 27.5% | Information Technology | |
| Catalent | 12.1% | Health Care | |
| Viatris | 11.7% | Health Care | |
| Moderna | 10.1% | Health Care | |
| Nvidia | 9.7% | Information Technology | |
| Merck | 9.0% | Health Care | |
| Eli Lilly | 8.1% | Health Care | |
| Intuitive Surgical | 8.0% | Health Care | |
| Allstate | 7.4% | Financials | |
| United Airlines Holdings | 7.3% | Industrials |
