Latest news with #HealthCareSelectSectorSPDRETF
CNBC
10-07-2025
- Business
- CNBC
Health care is trading at a big discount to the broader market. How to play it using options
The health care sector, as represented by the Health Care Select Sector SPDR ETF (XLV) , has significantly underperformed the S & P 500 over the past several years, trailing by 58% from the pre-pandemic February 2020 highs through the beginning of this week. It has also underperformed by 23.7% since the recent "liberation day" tariff-induced lows on April 8. This underperformance is the widest margin in decades over a similar period. The results of this weakness are that health care stocks are trading at a substantial discount, with the sector's 2025 forward price-to-earnings (P/E) ratio at 14 compared to a 10-year average of 18. The discount stems in part from weakness in some of the index's largest constituents. For example, troubled UnitedHealth trades at a P/E of 13, half the multiple it enjoyed before the resignation of the CEO, a government investigation into Medicaid billing and the assassination of the head of the company's health care unit in Manhattan. Eli Lilly has underperformed the broader market, despite its hugely successful obesity drugs, which may have led the stock to get a bit ahead of itself in 2024. Still, an aging U.S. population remains a significant driver of health care demand. With a record number of Americans aged 65 and older, health care spending is projected to continue rising sharply, potentially approaching 20% of GDP within the next seven-to-eight years. Health care is a non-cyclical sector, offering stability during economic uncertainty. While discretionary spending may decline in bear markets, health care demand remains resilient. Because of this, the sector provides defensive qualities. Although the shift toward commercial payers from government programs like Medicaid is expected to enhance profitability, it's clear from UnitedHealth's missteps in this area that there will be some growing pains. However, in this case, the return of the former CEO will likely help the company get back on track. The most significant XLV holdings include LLY, Johnson & Johnson , AbbVie , UNH , and Abbott Laboratories . The generally low volatility of these stocks is reflected in the ETF which, despite tracking a single sector, has had volatility only modestly higher than that of the diversified S & P 500, about 11% vs. roughly 10% over the past 30 days. The trade For options traders, the benefit of low volatility when making directional bets is low option prices. For example, a trader interested in creating a bullish bet with limited risk through the end of the year could buy the January 137 XLV calls for ~ $6.20, about 14% implied volatility, or about 4.6% of the current price, and look for opportunities to sell nearer dated puts on dips or upside calls on rips to offset the modest theta (decay). DISCLOSURES: None. All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
Yahoo
11-06-2025
- Business
- Yahoo
Should You Invest in the Health Care Select Sector SPDR ETF (XLV)?
The Health Care Select Sector SPDR ETF (XLV) was launched on 12/16/1998, and is a passively managed exchange traded fund designed to offer broad exposure to the Healthcare - Broad segment of the equity market. While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency. Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Healthcare - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 6, placing it in top 38%. The fund is sponsored by State Street Global Advisors. It has amassed assets over $34.94 billion, making it the largest ETF attempting to match the performance of the Healthcare - Broad segment of the equity market. XLV seeks to match the performance of the Health Care Select Sector Index before fees and expenses. The Health Care Select Sector Index includes companies from the following industries: pharmaceuticals; health care providers & services; health care equipment & supplies; biotechnology; life sciences tools & services; and health care technology. Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same. Annual operating expenses for this ETF are 0.08%, making it the least expensive product in the space. It has a 12-month trailing dividend yield of 1.72%. It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis. This ETF has heaviest allocation in the Healthcare sector--about 100% of the portfolio. Looking at individual holdings, Eli Lilly + Co (LLY) accounts for about 12.41% of total assets, followed by Johnson + Johnson (JNJ) and Unitedhealth Group Inc (UNH). The top 10 holdings account for about 56.07% of total assets under management. The ETF has lost about -0.96% and is down about -6.09% so far this year and in the past one year (as of 06/11/2025), respectively. XLV has traded between $128.77 and $157.24 during this last 52-week period. The ETF has a beta of 0.63 and standard deviation of 14.25% for the trailing three-year period, making it a medium risk choice in the space. With about 61 holdings, it effectively diversifies company-specific risk. Health Care Select Sector SPDR ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, XLV is a great option for investors seeking exposure to the Health Care ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well. IShares Global Healthcare ETF (IXJ) tracks S&P Global 1200 Healthcare Sector Index and the Vanguard Health Care ETF (VHT) tracks MSCI US Investable Market Health Care 25/50 Index. IShares Global Healthcare ETF has $3.81 billion in assets, Vanguard Health Care ETF has $15.41 billion. IXJ has an expense ratio of 0.41% and VHT charges 0.09%. To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Health Care Select Sector SPDR ETF (XLV): ETF Research Reports UnitedHealth Group Incorporated (UNH) : Free Stock Analysis Report Johnson & Johnson (JNJ) : Free Stock Analysis Report Eli Lilly and Company (LLY) : Free Stock Analysis Report Vanguard Health Care ETF (VHT): ETF Research Reports iShares Global Healthcare ETF (IXJ): ETF Research Reports This article originally published on Zacks Investment Research ( Zacks Investment Research
