Skip to main content

Sound Advice: May 4, 2022

Are Health Care Stocks on the Mend? 

The two sectors that have provided the highest returns in years past have been technology and health care.  We discussed technology last week.  This week it’s health care’s turn and even though the pandemic has brought a renewed focus on health care, most of these stocks have also experienced weakness this year.

Let’s focus on Johnson & Johnson, Pfizer, and Moderna since they have been the leaders in development of Covid vaccines.  Although all three have been in high gear turning out hundreds of millions of doses, their stock market performances have been anything but consistent.

Last year, it was estimated that Pfizer and Moderna had over $50 billion in sales from their Covid-19 vaccines.  Johnson & Johnson had $2.4 billion in Covid vaccine revenues.   

Given those numbers, one might well have expected a significant upsurge in the shares of these companies.  But the net result was anything but.  For 2022 to date, J&J shares have risen 5.4% in contrast to Pfizer and Moderna, which dropped 18% and 43%, respectively, since January 1st.

Even if we measure the shares’ market performance over the latest year, the returns have been less than stellar.  The best showing was from Pfizer shares, which climbed 25.2%.  J&J and Moderna were down 1.5% and 20.3%, respectively, over the same period.

For health care stocks generally, the picture has been no better.  The leading exchange-traded funds from iShares and SPDR, which hold wide baskets of these stocks, both lost ground over the period.  The good news, however, is that they did much better than tech stocks.

Over the last two decades, the average returns from tech stocks have been more than double those of health care stocks and more than triple that of the market generally.  But don’t forget, the gains from tech stocks came along with considerable fluctuation.  Increases from the health care stocks were well above those of the market generally with far less dramatic volatility.

N. Russell Wayne, CFP®

Sound Asset Management Inc.

Weston, CT  06883

203-222-9370

www.soundasset.com

www.soundasset.blogspot.com 

Any questions?  Please contact me at nrwayne@soundasset.com

Comments

Post a Comment

Popular posts from this blog

Sound Advice: March 16, 2022

Pullback . . . and then what?   The one certainty about the stock market is well illustrated by an account of a 1955 story about J. Pierpont Morgan given by the U.S. Secretary of the Treasury George M. Humphrey. The story is as follows: Somebody said: ‘Mr. Morgan, you are familiar with the stock market.?’ He said: ‘Yes.’ They said: ‘You know quite a lot about it?’   And he said: ‘Yes, I do.’ They said: ‘Do you think you can tell us what the stock market will do?’   He said: ‘Yes, I can.’   They said: ‘That is very interesting.   Will you please do so?’   He said: ‘Yes. It will fluctuate.’ Equally on point is a quotation from Benjamin Graham, widely known as the father of value investing and co-author with David Dodd of the recognized text on Security Analysis: “Most of the time common stocks are subject to irrational and excessive price fluctuations in both directions as the consequence of the ingrained tendency of most people to speculate or gamble . . . to give way to hop
Post a Comment
Read more

Sound Advice: January 5, 2022

Where do we go from here?   When you consider the wide variety of factors that impact the economy and the investment markets, it would be unrealistic to be encouraged by prospects for the next few years.  Yet, although opportunities for continued progress may be more limited, there are always some worth considering. Let’s put this in perspective.  Following the 23 trading days of The Pandemic Plunge, which saw prices collapse by 34%, the Standard & Poor’s 500 Index then rebounded 113% by the most recent December 31st.  On that date, the forward price-earnings ratio of stocks in the index had risen to a lofty 21.2 compared with a 25-year average of 16.8.  (That ratio is calculated by dividing the latest level of the index (4,766) by the estimated earnings of the included companies for the next 12 months .)  By all measures, that’s a hefty valuation, one that’s even more so since it depends on estimates of what’s to come, which are anything but assured. Other measures confirm
Post a Comment
Read more

Sound Advice: May 26, 2021

Growth vs. Value? One of the longest-running dichotomies in investing is the ongoing tug of war between growth stocks and value stocks.   Growth stocks are generally seen as companies that are growing consistently and, typically, at above average rates.   Value stocks, on the other hand, are companies whose progress is less consistent and often relatively slow.   At first glance, one wonders why investors would look beyond growth stocks to fill out their portfolios, but there’s more to the task of portfolio construction than just picking market stars such as Amazon, Apple, Facebook, and the like. Here’s the hitch.   Over time, most growth stocks will turn in better returns than most value stocks.   The key word here is most.   A portfolio of diversified growth stocks will usually be selling at significantly higher valuations (price-earnings ratios) than a portfolio of diversified value stocks.   Why?   Because more rapid and more consistent growth rates give investors greater con
Post a Comment
Read more