HEALTHCARE Stocks Are Coming Back Led by Biopharma so what’s next?
- The XLV portfolio weighting has shifted to LargeCap Biopharma which has performed well (see our articles).
- Biotech has shown strong momentum in Q3 with SMID caps leading: IBB up 16.3% YTD and XBI up 18.8% YTD.
- Look to the large caps of MEDTECH to show resurgence in Q4-see ThermoFisher (TMO) up 10% YTD, up 21% MTD.
The are several ways to position your health care portfolio. After a couple of sell-off days investors may come to realize there’s more to the market than AI and technology stocks. The XLV is starting to get atention because of recent strength with the XLV up 6.83% for the month. Yesterday it became more noticeable because of a sell-off in the hot SMID biotechs with the XBI down 2.04% but still up 19% YTD with the S&P 500 (SPY) down 0.53% up 13.94% YTD. . The more volatile biotech ETF the Ark Genomic Revolution (ARKG) was down 6.4% today while being up 28.93% YTD. Some strategists are worried that the strength in healthcare normally viewed as a defensive sector could portend overall weakness for the market which has been led by tech stocks with the QQQ up18.44% YTD and the XLK up 22.78% YTD.
Fidelity Select Biotechnology (FBIOX) a well-known fund is a leader because of its focus in biopharmaceuticals up 22%YTD.
But MEDTECH has been a laggard with the IHI up only 6% YTD despite outstanding performance recently from TMO.
.And another 4 Star Fund Fidelity Select Medical Technology and Devices (FSMEX) is up 7.68% MTD despite being flat YTD.
Those who follow healthcare stocks may know that thesector was hit hard by the fall of United Health which up until this year was the largest stock weighting in the XLV as well as many other funds. This weighting has shifted in 2025 so that biopharmaceuticals comprise about 50% of the XLV Today we can see another shift as MEDTECH or US Medical devices are coming back led by Intutiive Surgical (ISRG) up 13.89% on their earnings released last night. Worldwide procedures grew 20% with their Robotic Surgery systems an impressive 3rd Qtr with a Revenue jump to $23B and EPS climbed to $2.40. Note that the US Medical Device ETF (IHI) is up 2.68% over the past month including Abbott and JNJ reported earnings last week.
So the Healthcare sector is much more diversified and has growth potential from not only biotechnology but MEDTECH which was a leader in pre-pandemic days. Among theMEDTECH large caps only Boston Scientific (BSX) up 179% over 5 years has been outstanding. We see the potential here with Intuitive Surgical and will look for other trends that improve prospects for medical devices and medical information services.
LONG: ABT, BSX, FBIOX, FSMEX, IHI, ISRG, TMO.