When the Dow Jones Industrial Average (DJIA) endured three record-breaking point drops in March (within a period of just seven days to be precise), most expected such wild fluctuations to continue throughout 2020.
However, the world’s markets (including the S&P 500 and the FTSE 100 in the UK) have rebounded well since, with the prevailing outlook and sentiment level remaining positive as nations across the world emerge from stringent lockdown measures.
One of the main reasons for this is the fact that some markets have actively experienced growth during the pandemic, with healthcare and tech stocks performing particularly well while others have faltered. We’ll explore this further below, while asking which stocks offer the best value in the current climate.
The Rise of Healthcare Stocks
Despite being commonly overlooked, healthcare is one of the largest and most complex sectors in the financial market, and one that’s comprised of a broad range of companies and assets.
The dominant companies in this spend sell medical products and services globally, including outlets like Johnson & Johnson (JNJ), Pfizer Inc. (PFE) and Merck & Co. Inc. (MRK). Overall, healthcare stocks have outperformed the broader market considerably over the course of the last 12 months, delivering a return of 6.8% compared to the S&P 500’s cumulative gains of 5.5%.
This has much to do with the Covid-19 outbreak, as the demand for medical devices and clinical cleaning services has risen exponentially throughout Q1 and Q2. Of course, the precise challenges caused by coronavirus have driven significant growth levels in certain niches, and few stocks embody this better than CVS Health Corp. (CVS).
CVS is an ambitious $80 billion pharmacy and health plan provider, and one that typically delivers steady and consistent returns to investors.
However, the company is poised to play a key role in driving more accessible, affordable and personalised healthcare as society looks to rebuild in a post-Covid world. This could well see the firm’s share value soar in the near and medium-term, creating a unique opportunity to invest now.
Appraising Other Stocks and How Best to Target the Healthcare Sector
The diversified nature of more established, blue-chip stocks such as Johnson & Johnson also offer value to investors in the current climate, with this firm having increased its dividend payout annually for 57 consecutive years and produced recent yields as 2.7%.
The concept of diversification is key, and this is why you may prefer to invest in healthcare- focused indices rather than individual stocks. You can target such indexes through online brokerage firms like Tickmill, affording you the opportunity to invest in a balanced portfolio of assets that cover a broad range of growing market niches.
One of the most popular healthcare indexes is known as the ‘Health Care Select Sector SPDR Fund (NYSEMKT:XLV), which manages $17.3 billion-worth of assets and includes 61 diverse holdings.
You should also note that the healthcare sector tends to perform well late in the economic cycle, while it also typically holds firm during recessions (even those that aren’t triggered by a pandemic).
This means that you can invest in healthcare stocks regardless of whether or not you hold a short or long-term outlook, although you’ll have to vary your selections accordingly.