Health Care (XLV) is the second largest SPDR sector and comprises over 15% of the S&P 500.1 The complex sector operates hospitals and laboratories and sells consumer health products, pharmaceuticals, and medical equipment.
XLV is allocated among pharmaceuticals (31%), health care providers and services (22%), health care equipment and supplies (19%), biotech (16%), and life sciences tools and services (12%).2 Many firms in the sector rely on charitable donations and funding, marketing, scientific and medical research and advancement, and information technology.3
In the defensive and inelastic sector, medical needs and the aging population provide the demand. The field’s labor demand is also increasing, but the rise has left some specializations with unmet demand.3 Government regulations, technological innovation, R&D, and human health drive demand and daily business operations.
Based on industry data, health care companies are subject to extensive regulation and funding needs but are diverse and lead the way in major medical breakthroughs. Smaller firms gain a competitive edge with effective marketing and online presence. First State Investment Advisors maintains a significant position in large health care stocks Becton Dickinson and Co (BDX) and Johnson & Johnson (JNJ). In addition, client portfolios participate in pharmaceuticals through XLV.
For professional financial planners, contact First State Investment Advisors at (918) 492-1361.
Sources
1Select Sector SPDRs (Accessed Jan 4, 2023)
2State Street Global Advisors XLV: The Health Care Select Sector SPDR® Fund (Accessed Jan 5, 2023)
3First Research Industry Profile — Health Care Sector (oclc.org) (Accessed Jan 4, 2023)
This overview is for informational purposes only and is not a recommendation. It should not be the sole deciding factor in making an investment. Investing is a risk and, as with all risks, a positive return is not guaranteed. Past performance does not indicate future results.