The healthcare industry, especially its biotechnology corner, gave a stellar performance last year with the S&P biotechnology select industry index surging about 70%. The space saw a strong start to 2014 only to slump in the early phase of the second quarter on valuation concerns (read: A Comprehensive Guide to Biotech ETFs).
Having witnessed a rough stretch for about two months, the space started to gather steam from June. Of late, the sector has emerged as a strong performer with ETFs having returned in the range of 5% to 9% over the past one month.
Strong earnings were presumably the sector's driving force. The Medical sector saw 15.7% earnings growth on 12.3% increase in revenues. Most of the notable companies including Gilead Sciences (GILD), Celgene (CELG), Biogen (BIIB), Alexion Pharmaceuticals (ALXN) and Amgen(AMGN) either beat or at least met earnings expectations in Q2 (read: Biotech Earnings Put These ETFs in Focus).
If this was not enough, the outlook of the sector appears quite promising. The sector has obtained a high grade from various analysts. Within the Zacks Industry classification, the rank of the concerned MED-BIOMED/GENE industry is currently #77, 13 positions up from the past week (as of August 22, 2014). The rank is in the mid 1/3 of all 250 plus industries ranked, highlighting the group's near-term relatively favorable outlook (read: About Zacks Industry Rank).
With ever-increasing healthcare spending and unappeasable demand for new drugs, the biotechnology sector looks poised for good growth. Furthermore, the U.S. biotech sector represents an attractive investment opportunity thanks to increased M&A and IPO activities.
Rising activities in turn translated into growing investor enthusiasm for these stocks and the concerned ETFs. To add to these, the Affordable Care Act, also known as ‘Obamacare', spending boom in healthcare in emerging markets and an aging population will pull the sector going forward.
Amid such a situation, investors seeking to tap ...
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