Why Health Care ETFs Have Appeal, Despite Reform Battles

As optimistic economic news continues to appear on our televisions and in newspapers, the health care sector and its exchange traded funds (ETFs) have rallied in kind, and for good reason.

Recently, CVS Caremark (CVS) reported quarterly earnings and announced a 22.1% revenue growth in its pharmacy services segment and 7.5% growth in pharmacy same-store sales. It’s just indicative of the medical sector overall, because it’s one sector with year-over-year revenue growth, states Charles Rotblut of Zacks.com.

The medical sector has remained attractive because:

• There’s growth in elderly population
• An increase in diseases and cancer rates
• People are seeking out ways to live longer and healthier lives

Down the road, the Obama administration’s emphasis on health care reform could enable the sector to remain attractive, especially if it results in greater access to prescription medicine.  To make the sector even more appealing, political risks that are inherent in the sector have already been priced in as can be seen in relative valuations, Rotblut says.

What’s health care costing these days? NPR’s Planet Money is doing a great series on the health care industry and where the money goes. It’s worth a listen.

• iShares Dow Jones U.S. Healthcare Provider (IHF): is up 15.6% year-to-date

• Rydex S&P Equal Weight Health Care (RYH): up 18.2% year-to-date

• PowerShares Dynamic Healthcare (PTH): up 4.2% year-to-date

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