Revival for Health Care, Biotech

The health care fund that took the biggest hit this week is the iShares S&P Global Healthcare Sector Index Fund ( IXJ Quote), an ETF that gave back 1.15% for the five trading days ending Jan. 11. The fund holds 18.0% in health care products, 8.4% in health care services and 6.7% biotechnology. But its largest concentration is in pharmaceuticals at 63.9%, including Johnson & Johnson (JNJ Quote), Pfizer, Novartis(NVS Quote), and GlaxoSmithKline (GSK Quote).

With even more exposure to pharmaceutical stocks, at 94.8%, the ( FPHAX Quote) Fidelity Select Pharmaceuticals Portfolio is also seen to be at risk from the Democratic-controlled Congress' attempt to mandate that Medicare negotiate for lower prescription drug prices. The fund's top holding is Merck, followed by Pfizer, Novartis, Bristol-Myers Squibb (BMY Quote) and Eli Lilly (LLY Quote).

This has been a good week for funds holding biotechnology stocks. Plus, the long-term seems brighter with the health care industry spending considerable time and money looking inward to see how to become more efficient in the delivery of care and the purchasing of drugs and other health care products.

Unlike last week's utility funds, health care and biotechnology funds have significantly higher levels of volatility. This accounts for the comparatively low ratings generated by our risk-adjusted return mutual fund model for the best and worst performers. If the president's threatened vetoes are sustained, the worst performers above could easily switch places with the best performers in the short run.