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Play the Best Sector of Summer With These ETFs & Stocks

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After a choppy period, the healthcare sector is once again in investors’ favor. In the past month (as of Jun 7), Health Care Select Sector SPDR ETF (XLV - Free Report) has gained about 5.3% compared with the 3.9% advancement of the SPDR S&P ETF SPY).

While a few sector-specific factors have driven the rally, a seasonal tailwind also had a role to play it seems. Per a new Oppenheimer note, “health care has been the best-performing sector between June and August since 1990,” quoted on CNBC.com.

The Positive Sector Vibes

President Trump’s announcement of the drug plans in May, which were in the best interest of pharma companies, favored the space. The drug plans will likely put pressure on U.S. trading partners, forcing them to pay more for medicines.

Also, on May 30, the President signed the 'Right To Try' bill into law. This law will help patients suffering from terminal diseases to undergo experimental treatments and use drugs that are not yet approved by the FDA. Needless to say, the law brought good tidings for biotech companies (read: Fed, Trade & Global Politics to Rule June: 6 ETF Picks).

The range of M&A activity is spreading beyond the healthcare sector. The U.S. healthcare supply chain is consolidating fast, with deals across the industry ranging from insurers, pharmacies to drug distributors.

Apart from this, a pickup in the pace of innovation, promising drug launches, growing importance of biosimilars, cost-cutting efforts, an aging population, continued demand for new drugs and ever-increasing health care spending have been boosting the space.

The increasing adoption of technology is another boon for the healthcare sector. Hospitals in Israel and the United States have started to implement AI-based predictive analytics.

Per an advisory firm ABI Research, the number of patient monitoring devices deploying AI models for predictive analytics will likely increase from 53,000 at the end of 2017 to 3.1 million in 2021, at a CAGR of 176%. Overall AI implementation will enable hospitals to save around $52 billion in 2021, with North America leading the cost savings ($21 billion).

Against this backdrop, we highlight a few healthcare ETFs and stocks that have been steady at the start of June.

ETF Picks

Invesco Dynamic Pharmaceuticals ETF (PJP - Free Report)

The underlying Dynamic Pharmaceutical Intellidex Index comprises stocks of U.S. pharmaceutical companies. The index evaluates companies based on the criteria like fundamental growth, stock valuation, investment timeliness and risk factors. The fund charges 56 bps in fees (read: Pharma & Biotech ETFs Soar on Trump's Drug Plan).

iShares US Pharmaceuticals ETF (IHE - Free Report)

The underlying Dow Jones U.S. Select Pharmaceuticals Index is free-float adjusted market capitalization-weighted index. The fund has a high heavy company-specific concentration risk. The fund charges 44 bps in fees.

Health Care Select Sector SPDR ETF (XLV - Free Report)

The fund gives exposure to pharmaceuticals; health care providers & services; health care equipment & supplies; biotechnology; life sciences tools & services; and healthcare technology. It charges 13 bps in fees.

Stock Picks

Strata Skin Sciences Inc. (SSKN - Free Report)

The Zacks Rank #1 company is a medical technology company which focused on the dermatology market.The stock belongs to a top-ranked Zacks industry (top 27%).

Odonate Therapeutics Inc. (ODT - Free Report)

The Zacks Rank #2 company is a pharmaceutical company. It engaged in the development of therapeutics to improve and extend the lives of patients with cancer. The stock hails from a top-ranked (top 42%) Zacks industry.

Enanta Pharmaceuticals Inc. (ENTA - Free Report)

This Zacks Rank #2 biotechnology company is into the research and development of molecule drugs for the treatment of infectious diseases. The stock hails from a top-ranked (top 42%) Zacks industry.

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