by TOM LYDON
on OCTOBER 24, 2019
Sen. Elizabeth Warren (D-MA) is still one of the leading
contenders for the 2020 Democratic presidential nomination, but her odds have
recently dipped in some prediction markets, providing a boost to the iShares U.S. Healthcare Providers ETF (NYSEArca: IHF) in
the process.
IHF is a traditional index fund that targets U.S. equities in
the healthcare providers sector. Specifically, the ETF provides exposure to
U.S. companies from health insurance, diagnostics, and specialized treatment.
The fund is up about 3% over the past month, a period that includes an
impressive earnings report from UnitedHealth
(NYSE: UNH), IHF’s largest holding.
IHF has been dogged this year by speculation that Medicare For
All could become a reality if Democrats win the White House in 2020. Many of
the most visible Democratic contenders for that party’s 2020 presidential
nomination are embracing Medicare For All.
“Betting odds of the Massachusetts Democrat’s snagging her
party’s presidential nomination have sagged to 39% from over 50% around Labor
Day, according to Strategas Research’s Washington research team, led by Dan
Clifton,” reports Randall Forsyth for
Barron’s.
Interest In IHF
For long-term investors, IHF remains a quality because the
long-term outlook for UnitedHealth, assuming Medicare For All doesn’t come into
play, is bright.
“Cost advantages and network effects generated by the company’s
size and scope underpin UnitedHealth’s wide moat and we think support its
ability to serve clients at a lower overall cost than that of rivals,” according to a Morningstar note on UNH out earlier this month.
“The result is enrollment growth and returns on capital that are nearly
unachievable by competing firms.”
Previously, investors embraced healthcare stocks for the
sector’s growth and defensive characteristics, providing investors with yields
and valuations that are less stretched than other yield-producing stocks like
utilities. Some market observers believe the sector’s selloff is overdone and
that healthcare stocks could be poised to bounce back.
“In the betting markets, Warren had become the ‘consensus view’
among investors to win the Democratic nomination. Strategas’ D.C. team said
that should be a signal to contrarian investors willing to go against the
crowd, as apparently already happened with health-care stocks,” according to
Barron’s.
For more information on the healthcare segment, visit our healthcare
category.
The opinions and forecasts expressed herein are solely those of
Tom Lydon, and may not actually come to pass. Information on this site should
not be used or construed as an offer to sell, a solicitation of an offer to
buy, or a recommendation for any product.
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