Make Money in Growing Health-Care Stocks the Easy Way

Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect the health-care industry to thrive as the world's population grows, gets older, and develops medical conditions, the Vanguard Health Care ETF (NYSE: VHT  ) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The Vanguard ETF's expense ratio -- its annual fee -- is a very low 0.19%. (Vanguard is known for low fees.)

This ETF has performed reasonably well, outperforming the S&P 500 over the past five years, but underperforming it over the past three. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.

With an ultra-low turnover rate of 7%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.

What's in it?
Plenty of health-care companies had strong performances over the past year. Intuitive Surgical (Nasdaq: ISRG  ) , for instance, surged 50%, as more hospitals bought its robotic surgery machines, and it enjoyed repeating revenue from service contracts and sales of supplies and accessories for those machines. Growth abroad can boost its performance even more.

Big biotech company Amgen (Nasdaq: AMGN  ) advanced 20%, despite some worries about its debt and expiring patent protection issues. Some investors are pleased that the company is making moves such as reducing some of its risks by partnering with AstraZeneca. Meanwhile, the company just introduced a dividend, recently yielding 2.2%.

Yielding a whopping 5% recently, Eli Lilly (NYSE: LLY  ) gained 16% over the past year. The company received FDA approval a few weeks ago for its radioactive agent Amyvid, which is used in diagnostic tests to help detect Alzheimer's. It is also offering up to $150 million to venture-capital firms, thereby investing in startups -- with the right to buy some promising compounds.

Other companies didn't do as well last year, but could see their fortunes change in the coming years. Express Scripts (Nasdaq: ESRX  ) gained just 3%. Its merger with Medco Health Solutions gives it a 40% market share in pharmacy-benefits management and 60% of the mail-order drug business. When Express Scripts and Walgreen broke up their partnership recently, Walgreen took a big hit, losing a lot of customers and revenue. If the companies were to find a way to work together, it could be a big win-win result, benefiting both.

The big picture
Demand for health-care products and services isn't going away anytime soon. A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.

Learn about 4 ETFs You Can Count On. And if you're looking for some great investments beyond ETFs, consider these 5 Stocks Growing Their Dividends by 20% Per Year.

Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, owns shares of Intuitive Surgical and Amgen, but she holds no other position in any company mentioned. Click here to see her holdings and a short bio. Motley Fool newsletter services have recommended buying shares of Intuitive Surgical and Express Scripts. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 1862793, ~/Articles/ArticleHandler.aspx, 7/29/2014 1:42:56 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement