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
TheStreet Open House

Health Care Stocks Steam Ahead Even as Sector Growth Slips

Stock quotes in this article: VHT, UNH, TMO, ACT, IBB

Excitement around new innovations has lit a fire under biotech stocks of late. While the Vanguard Health Care (VHT) ETF was up more than 28% year to date through Friday, it still doesn't match the more than 47% gain posted by the iShares NASDAQ Biotechnology Index (IBB) ETF. Some top-performing biotech stocks have included larger players like Celgene (CELG) and Gilead Sciences (GILD) up 88% and 67%, respectively, year to date, as well as emerging names like NPS Pharmaceuticals (NPSP), shares of which have more than tripled this year.

"The biotech industry has been pretty successful in bringing new products to market over the last few years and investors have recognized that in 2013," said John Sullivan, director of equity research and health care strategist at health care-focused investment bank Leerink Swann.

The Food and Drug Administration has played an important role in the industry's success, approving more new drugs in 2012 than in any year since 1996.

While some might say the FDA has become more permissive, Sullivan argued it has been "more transparent and communicative to drug sponsors," which he said "has benefited drugs and biotech companies in that they've been able to more reliably put the information in front of the FDA that the FDA needs to make a decision."

M&A has been another factor driving the health care sector's strong performance. Thermo Fisher Scientific's (TMO) acquisition of Life Technologies (LIFE), for example, and Warner Chilcott's (WCRX) sale to Actavis (ACT) have both been lauded by investors.

"Investors, I think, are responding to what they see as the benefits of consolidation in the specialty pharmaceutical industry and the likely earnings growth that can come as you eliminate redundant functions and things like that," Sullivan said.

Another strong performing area within the sector has been health insurance. Once thought to have the most to lose from the Affordable Care Act of 2010, better known as Obamacare, health insurers have only added to strong gains they posted in 2012. Year to date through Friday, shares of UnitedHealth (UNH) were up 36.53%, Cigna (CI) was up 51.20%, WellPoint (WLP) was up 43.28%, Aetna (AET) 40.6% and Humana (HUM) 39.35%.

Leerink Swann's Sullivan said he believes the re-election of President Obama in 2012 and the Supreme Court's decision last year to uphold the main provisions of the health care reform law have boosted the stocks.

2 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
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!
DOW 16,816.17 -226.73 -1.33%
S&P 500 1,948.55 -23.74 -1.20%
NASDAQ 4,425.1710 -68.2190 -1.52%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

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