Historically, the healthcare sector has been a favorite stomping ground for “widows and orphans.” That means the stability of the sector has made it a prime choice for conservative investors. After all, steady revenues from drug sales or equipment allow firms to have predictable and growing cash flows. And those cash flows translate into big dividends.
However, lately, the healthcare sector has been on more of a roller coaster than a smooth ride across the plains.
Much of the volatility of the sector has been due to various political influences rather than a growing and steady demand. For investors, this creates opportunities to snag firms that will do well no matter the political environment. Conversely, there are plenty of healthcare stocks you might want to leave well enough alone.
Obamacare vs. Trumpcare
The healthcare sector’s roller coaster began back in the early days of Obamacare’s passage. The landmark bill that allowed millions of Americans to have insurance access drove returns for many healthcare stocks in the subsequent years after its approval. It was like a proverbial shot in the arm for the sector. And as a result, healthcare stocks and broad sector measures like the Health Care Select Sector SPDR Fund (XLV) rallied to record highs.