This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Health Stock Funds: Right Prescription in a Recession?

Stocks in this article: HGHAX PRHSX SWHFX

For 2008, health funds have ranked as the top-performing equity category of mutual funds tracked by Morningstar. That may provide some comfort to investors who own health stocks for their defensive qualities -- stocks that can hold up during downturns. But compared to their showings in previous bear markets, health funds have proved disappointing lately.

During the first 11 months of 2008, the average health fund lost 28.6%, outpacing the S&P 500 by about 9 percentage points, according to Morningstar. In contrast, health funds stayed in the black during the down year of 1990, gaining 17.0%, more than 20 percentage points better than the S&P. For the difficult three-year period that began in 2000, health funds returned 0.5% annually, 15 percentage points ahead of the S&P.

The recent weaker showing of the funds may be partly caused by the changing nature of the health sector. In the past, insurance paid a big chunk of health costs, so consumers continued using drugs and scheduling elective surgeries even during times of economic recessions. But lately consumers have been forced to foot a bigger share of their bills as copayments and insurance premiums have risen. As a result, patients have been cutting back as the economy worsens. "During this recession, we are seeing a reduction in the amount of drugs used and the number of trips to physicians' offices," says Ann Gallo, portfolio manager of Hartford Global Health (HGHAX).

Biotech Select

Not all sectors of the health category have suffered equally this year. Some biotechnology shares have remained in the black, continuing to report solid sales of vital drugs. Boasting strong balance sheets, major pharmaceutical stocks dropped 20% or less. At the same time, shares of hospital suppliers lost more than 20%. Health insurers saw their stocks cut in half as investors fled all kinds of financial businesses.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,672.60 -141.38 -0.79%
S&P 500 2,051.82 -11.33 -0.55%
NASDAQ 4,757.8790 +7.4820 0.16%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs