In the wake of the most recent elections, financial and energy stocks have experienced notable gains, reflecting investors’ optimism towards policies heralded by President-elect Donald Trump. This surge, often referred to as the “Trump trade,” has led to an 8% spike in financials and a 5% increase in energy stocks over the past week. However, a deeper analysis suggests that this focus may be misleading, as many investors overlook promising opportunities within the healthcare sector.
Jeremiah Buckley, a portfolio manager at Janus Henderson, has posited that while the financial sector may seem attractive right now, it could be ahead of its long-term value. Buckley draws attention to the healthcare sector, which has underperformed, rising only 2% amidst the broader market rally. This disparity highlights the potential for growth in healthcare stocks, especially with the incoming administration likely to create a more favorable regulatory environment.
Buckley points out that healthcare has been plagued by stringent regulatory challenges over the past few years, particularly regarding pharmaceutical pricing and Medicare/Medicaid regulations. His insights suggest that a shift towards a more business-friendly approach could stimulate growth within the healthcare industry, positioning it as an attractive option for investors.
The healthcare sector is experiencing a wave of innovation, particularly in research and development. Buckley emphasizes the significance of advancements in drugs and therapies, with examples such as GLP-1 medications leading to increased revenues for major pharmaceuticals like Eli Lilly. This innovation is not limited to pharmaceuticals; it extends across various domains, including cancer treatment, diabetes management, and medical technology. The breadth of discoveries suggests that healthcare stocks could offer robust returns as they capitalize on new products and increasing adaptability to market demands.
Furthermore, Buckley anticipates that healthcare service companies will enjoy better profit margins as patient utilization trends stabilize following the disruptions caused by the pandemic. This stabilization could enhance revenues and attract investor interest, making healthcare stocks more appealing over time.
Janus Henderson’s U.S. Dividend Income Fund reflects Buckley’s insights, as it emphasizes significant investments in top healthcare firms such as UnitedHealth Group, AbbVie, and Medtronic. These companies not only exemplify stability but also position themselves at the forefront of medical innovation. Similarly, the Growth and Income Fund, which holds a strong percentage in Eli Lilly as well as other vital healthcare stocks, mirrors this strategic focus.
Both funds highlight a commitment to capitalizing on healthcare advancements and potential regulatory shifts, embodying a strategic approach that may yield substantial benefits for investors willing to explore beyond the spotlight of financial and energy stocks.
While recent market rallies have favored financial and energy sectors, the healthcare industry presents an underappreciated avenue for investment. With a hint of regulatory relief and cutting-edge innovation on the horizon, healthcare stocks could ultimately be the hidden gem that savvy investors are looking for in these turbulent times. As history indicates, sectors that defy current trends often deliver surprising returns, reinforcing the necessity for a broad and informed investment strategy.