Shares of US healthcare companies are gaining favour as investors bank on their ability to weather rocky economic times and the stocks look more reasonably valued than other defensive sectors.
“We feel like it is one of the last opportunities to play defence at a reasonable price,” said Walter Todd, chief investment officer at Greenwood Capital in South Carolina. Earnings in the healthcare sector — which includes large drugmakers, medical equipment companies, health insurers and biotech firms — have outperformed in recent recessionary periods. That makes them an attractive target for investors looking for assets that can weather a potential downturn, as recession worries grow amid aggressive monetary policy tightening from the Federal Reserve.
“If they have healthcare needs, that is usually one of the last places that people will ration,” Potoker said. Meanwhile, other defensive sectors are trading at premiums relative to their historical valuations — with utilities at a premium of over 30% and consumer staples at a 12% premium.