Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
INTEL (INTC) Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 18th Jan 20
Gold Stocks Wavering - 18th Jan 20
Best Amazon iPhone Case Fits 6s, 7, 8 by Toovren Review - 18th Jan 20
1. GOOGLE (Alphabet) - Primary AI Tech Stock For Investing 2020 - 17th Jan 20
ERY Energy Bear Continues Basing Setup – Breakout Expected Near January 24th - 17th Jan 20
What Expiring Stock and Commodity Market Bubbles Look Like - 17th Jan 20
Platinum Breaks $1000 On Big Rally - What's Next Forecast - 17th Jan 20
Precious Metals Set to Keep Powering Ahead - 17th Jan 20
Stock Market and the US Presidential Election Cycle  - 16th Jan 20
Shifting Undercurrents In The US Stock Market - 16th Jan 20
America 2020 – YEAR OF LIVING DANGEROUSLY (PART TWO) - 16th Jan 20
Yes, China Is a Currency Manipulator – And the U.S. Banking System Is a Metals Manipulator - 16th Jan 20
MICROSOFT Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 15th Jan 20
Silver Traders Big Trend Analysis – Part II - 15th Jan 20
Silver Short-Term Pullback Before Acceleration Higher - 15th Jan 20
Gold Overall Outlook Is 'Strongly Bullish' - 15th Jan 20
AMD is Killing Intel - Best CPU's For 2020! Ryzen 3900x, 3950x, 3960x Budget, to High End Systems - 15th Jan 20
The Importance Of Keeping Invoices Up To Date - 15th Jan 20
Stock Market Elliott Wave Analysis 2020 - 14th Jan 20
Walmart Has Made a Genius Move to Beat Amazon - 14th Jan 20
Deep State 2020 – A Year Of Living Dangerously! - 14th Jan 20
The End of College Is Near - 14th Jan 20
AI Stocks Investing 2020 to Profit from the Machine Intelligence Mega-trend - Video - 14th Jan 20
Stock Market Final Thrust - 14th Jan 20
British Pound GBP Trend Forecast Review - 13th Jan 20
Trumpism Stock Market and the crisis in American social equality - 13th Jan 20
Silver Investors Big Trend Analysis for – Part I - 13th Jan 20
Craig Hemke Gold & Silver 2020 Prediction, Slams Biased Gold Naysayers - 13th Jan 20
AMAZON Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 11th Jan 20
Gold Price Reacting to Global Flash Points - 11th Jan 20
Land Rover Discovery Sport 2020 - What You Need to Know Before Buying - 11th Jan 20
Gold Buying Precarious - 11th Jan 20
The Crazy Stock Market Train to Bull Eternity - 11th Jan 20
Gold Gann Angle Update - 10th Jan 20
Gold In Rally Mode Suggests Commitment of Traders (COT) Data - 10th Jan 20
Disney Could Mount Its Biggest Rally in 2020 - 10th Jan 20
How on Earth Can Gold Decline During the U.S. – Iran Crisis? - 10th Jan 20
Getting Your HR Budget in Line - 10th Jan 20
The Fed Protects Gamblers at the Expense of the Economy - 9th Jan 20
Last Chance to Get Microsoft Windows 10 for FREE! - 9th Jan 20
The Stock Market is the Opiate of the Masses - 9th Jan 20
Is The Energy Sector Setting Up Another Great Entry? - 9th Jan 20
The Fed Is Creating a Monster Bubble - 9th Jan 20
If History Repeats, Video Game Stocks Could Soar 600%+ - 9th Jan 20
What to Know Before Buying a Land Rover Discovery Sport in 2020 - 8th Jan 20
Stock Market Forecast 2020 Trend Analysis - 8th Jan 20
Gold Price at Resistance - 8th Jan 20
The Fed Has Quietly Started QE4 - 8th Jan 20
NASDAQ Set to Fall 1000pts Early 2020, and What it Means for Gold Price - 8th Jan 20
Gold 2020 - Financial Analysts and Major Financial Institutions Outlook - 8th Jan 20
Stock Market Trend Review - 8th Jan 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Healthcare Stocks Taking Off as Tech Companies Tumble

Companies / Healthcare Sector Mar 15, 2011 - 07:01 AM GMT

By: Money_Morning

Companies

Best Financial Markets Analysis ArticleJon D. Markman wrtes: Technology and commodities companies have been among the hardest hit over the past few weeks, as major players move from cyclical stocks to more defensive areas like healthcare stocks.

In the technology sector, the worst of the sell-off has been in the optical stocks. That's a shame because many of these stocks finally looked like they were on the verge of emerging from long bear markets. But the optical stocks - so popular during the tech bubble - were kicked in the head whenFinisar Corp.(Nasdaq: FNSR) issued a very weak outlook for its April quarter.


Finisar shares lost 38.5% last Wednesday and fellow industry giantJDS UniphaseCorp. (Nasdaq: JDSU) took a 17% hit. Just two months ago, we were talking about how it looked like these guys were back - well, so much for that.

Semiconductors are also on the run, with Altera Corp. (Nasdaq: ALTR) down more than 7.5% in the past week andLam ResearchCorp. (Nasdaq: LRCX) down 10.5% in that time. These companies had been very popular until about two weeks ago, so it's remarkable how quickly sentiment can change.

I've been racking my brain for an explanation as to how the semiconductor companies could go south so fast, and I have come up with four rationales.

The first is structural. You may have heard that Carl Icahn is closing his hedge fund and returning money to investors. Several other smaller hedge funds recently made similar announcements.I would not be surprised if these funds are liquidating their growth-stock holdings three weeks before the end of the first quarter.

The second rationale is legal. The Galleon hedge fund insider trading trial is finally starting in a New York federal court. The witness list was recently leaked and there was a lot of speculation that Raj Rajaratnam, the main target of the case, might reach a plea bargain with prosecutors before the trial began. Also, very late in the game, the government has named three McKinsey & Co. consultants as targets of the investigation.

Galleon traded a lot of technology stocks, and McKinsey consulted at the highest level for a lot of those same firms. Investors that own sizeable stakes in any of the tech companies that could be mentioned during the trial may be dumping their shares for fear those companies will receive negative publicity.

My third rationale is fundamental. Texas Instruments Inc.'s (NYSE: TXN) earnings update was very disappointing. One of the key drivers of upside in stocks is the potential for positive surprises relative to expectations. TXN told us that expectations might actually be too high - not too low - in some of the most important growth areas: mobile and baseband.

The big miss by Finisar confirms that view. Moreover, I received some analysis by an independent institutional research provider that appears to show earnings growth and inventory build for the sector may have peaked last quarter.

And my fourth, and final, rationale is crowd behavior.Technology has become a crowded trade. The opportunities in mobile broadband were fresh ideas three years ago. Now they're conventional wisdom. Some of the biggest names in the sector have stalled. Cavium Networks Inc. (Nasdaq: CAVM), NetApp Inc. (Nasdaq: NTAP), Amazon.com Inc. (Nasdaq: AMZN) and Google Inc. (Nasdaq: GOOG) are all rolling over.

There will still be huge opportunities for all these companies in the years ahead, but expectations may have run ahead of prices. All of these stocks are still well above their 200-day averages, and thus in bull mode, but the passion among investors is gone for now.

So as investors we may want to turn our attention elsewhere for the time being. And that brings me to the healthcare sector.

The Key to a Healthy Portfolio
The healthcare sector is fascinating because its strength is not coming from the typical value/defensive aspects of the industry - i.e. drug makers. Instead it's coming from managed care stocks.

Since Feb. 24, the iShares Dow Jones US Healthcare ETF (NYSE: IHF) fund is up1%, while the Standard & Poor's 500 Index is down nearly 2% andthe SPDR S&P Semiconductor ETF (NYSE: XSD) is down 7%.

Positive comments from management coming out of recent investor conferences have helped improve sentiment for companies like Humana Inc. (NYSE: HUM), Wellpoint Inc. (NYSE: WLP), UnitedHealth Group Inc. (NYSE: UNH), and Coventry Health Care Inc. (NYSE: CVH).

These healthcare stocks are no longer being ignored and they're undervalued relative to other so-called "growth" stocks.

Brokerages have weighed with upgrades, as well, following the resolution of uncertainties surrounding the new healthcare legislation and a renewed appreciation for these companies' predictable operating fundamentals.

Thinking about why managed healthcare might be advancing at a time when energy is the only other prominent out-performer led me to recall another similar span in the market, which was not too long ago. That was the rather odd period of 2004-2005.

People remember the 2003-2007 period as a great bull market, but they conveniently forget that 2004 and 2005 were largely flat for most stocks. 2004 was actually negative until the final three months of the year and 2005 was a snoozer in which the S&P 500 gained only 3%.

While industrials, tech companies and drug makers sleepwalked through that period, energy and managed care stocks performed very well. In fact, some of the leading healthcare companies, mentioned above, rose 100% in that two-year span.

These stocks were appropriately massacred from 2006 to 2009, losing around 60% of their value, but they now seem quite perky, with rising earnings and upside surprises.

Still, the most important part of the story is not their earnings - it's that these companies offer a good hedge against any shakiness in the economy for the rest of the year. At the same time, they should perform in line during stronger periods at a minimum. So put them on your radar.

[Editor's Note: Money Morning Contributing Writer Jon D. Markman has a unique view of both the world economy and the global financial markets. With uncertainty the watchword and volatility the norm in today's markets, low-risk/high-profit investments will be tougher than ever to find.

It will take a seasoned guide to uncover those opportunities.

Markman is that guide.

In the face of what's been the toughest market for investors since the Great Depression, it's time to sweep away the uncertainty and eradicate the worry. That's why investors subscribe to Markman's Strategic Advantage newsletter every week: He can see opportunity when other investors are blinded by worry.

Subscribe to Strategic Advantage and hire Markman to be your guide. For more information, please click here.]

Source : http://moneymorning.com/2011/03/15/...

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules