Pharma stocks have bounced back from their prior selloff, but whether they will continue their upward trend under a Donald Trump administration remains unclear.
Beyond comments of revising the Affordable Care Act, Trump has not provided any details on the direction of health care and insurance in the U.S., said David Twibell, president of Custom Portfolio Group in Englewood, Colo.
Before the election, pharmaceutical and biotech stocks had underperformed against the S&P 500 partly because the stock market feared that a Hillary Clinton victory would lead to price controls on drugs. In the wake of the presidential election, some of the surge in prices is due to investors unwinding short positions or reinitiating positions they had sold over the prior months in this sector, he said.
ETFs and Stocks to Add
Investors who want to increase their allocation in pharma or health care equities in their 401(k), IRA or brokerage accounts, could turn to broad-based sector ETFs such as SPDR S&P Pharmaceuticals (XPH) and iShares Dow Jones U.S. Pharmaceuticals Index (IHE) , which are both good options, said Twibell.
Another strategy is to look at a less direct way to benefit from a resurgence in the pharmaceutical industry by owning the SPDR S&P Biotech (XBI) , which tends to track developments in the drug industry, but also provides access to more dynamic companies than the traditional large cap pharma companies like Pfizer (PFE) , Merck (MRK) and Johnson & Johnson (JNJ) , he said.