Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Gold & the USDX: Correlations - 2nd Dec 20
How An Ancient Medicine Is Taking On The $16 Trillion Pharmaceutical Industry - 2nd Dec 20
Amazon Black Friday vs Prime Day vs Cyber Monday, Which are Real or Fake Sales - 1st Dec 20
The No.1 Biotech Stock for 2021 - 1st Dec 20
Stocks Bears Last Chance Before Market Rally To SPX 4200 In 2021 - 1st Dec 20
Globalists Poised for a “Great Reset” – Any Role for Gold? - 1st Dec 20
How to Get FREE REAL Christmas Tree 2020! Easy DIY Money Saving - 1st Dec 20
The Truth About “6G” - 30th Nov 20
Ancient Aztec Secret Could Lead To A $6.9 Billion Biotech Breakthrough - 30th Nov 20
AMD Ryzen Zen 3 NO UK MSRP Stock - 5600x, 5800x, 5900x 5950x Selling at DOUBLE FAKE MSRP Prices - 29th Nov 20
Stock Market Short-term Decision Time - 29th Nov 20
Look at These 2 Big Warning Signs for the U.S. Economy - 29th Nov 20
Dow Stock Market Short-term and Long-term Trend Analysis - 28th Nov 20
How To Spot The End Of An Excess Market Trend Phase – Part II - 28th Nov 20
BLOCKCHAIN INVESTMENT PRIMER - 28th Nov 20
The Gold Stocks Correction is Maturing - 28th Nov 20
Biden and Yellen Pushed Gold Price Down to $1,800 - 28th Nov 20
Sheffield Christmas Lights 2020 - Peace Gardens vs 2019 and 2018 - 28th Nov 20
MUST WATCH Before You Waste Money on Buying A New PC Computer System - 27th Nov 20
Gold: Insurance for Prudent Investors, Precious Metals Reduce Risk & Preserve Wealth - 27th Nov 20
How To Spot The End Of An Excess Market Trend Phase - 27th Nov 20
Snow Falling Effect Christmas Lights Outdoor Projector Amazon Review - 27th Nov 20
4 Reasons Why You Shouldn't Put off Your Roof Repairs - 27th Nov 20
Further Clues Reveal Gold’s Weakness - 26th Nov 20
Fun Things to Do this Christmas - 26th Nov 20
Industries that Require Secure Messaging Apps - 26th Nov 20
Dow Stock Market Trend Analysis - 25th Nov 20
Amazon Black Friday Dell 32 Inch S3220DGF VA Curved Screen Gaming Monitor Bargain Deal! - 25th Nov 20
Biden the Silver Bull - 25th Nov 20
Inflation Warning to the Fed: Be Careful What You Wish For - 25th Nov 20
Financial Stocks Sector ETF Shows Unique Island Setup – What Next? - 25th Nov 20
Herd Immunity or Herd Insolvency: Which Will Affect Gold More? - 25th Nov 20
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis 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