Do you like buying low and selling high? If you answered "no," you can return to watching Jersey Shore reruns in your Snuggie. If you answered "yes," then it may be time to take a look at health-care stocks. Finding out-of-favor industries and unloved stocks is a key ingredient to cooking up some nice returns, and few industries have received more scorn lately than health care. Instead of trying to pick out a few key companies, when an entire sector is this much out of favor, a broad ETF may serve your needs better.
So how bad has it been for pharma, biotech, and health-care investors? Ugly. Really ugly. After a period of great returns in the 1990s, seemingly the only times health-care stocks outperformed in the last 10 years was when the broader market was down. Even as the market rebounded in 2010, the health care sector was only up 3%. If you want out of favor, it doesn't get much out of favor than this.
So the kindest way to describe health-care investments is "defensive," but that doesn't mean you can't earn nice returns in certain corners of the sector. Let's look at several ETFs that can fill both needs.
For investors looking to get defensive or anticipating a trend reversal, iShares S&P Global Healthcare
One space where it is tougher to pick a favorite is in the rough and tumble world of biotech. Here, binary outcomes, whether a drug successfully passes each checkpoint on the road to approval, and takeovers have dramatic effects on share prices. If you don't have time to wade through clinical trial data, it may be advantageous to fish with the wide net that an ETF like PowerShares Dynamic Biotech & Genome
And for those who really want to venture into the wild west of small-cap pharma, may I suggest SPDR S&P Pharmaceuticals
No matter which way you go, there are ETFs that can accomplish a variety of investment goals within the health-care sector. If you have any favorites that I missed, shout them out in the comments below.
David Williamson owns shares of Pfizer and Johnson & Johnson, which are both Motley Fool Inside Value recommendations. Motley Fool Options has recommended a diagonal call position on Johnson & Johnson, which is also a Motley Fool Income Investor selection. The Fool and Motley Fool Alpha own shares of Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.