For risk-averse investors, well-performing healthcare funds could be a great spot, according to Bank of America. Investment and exchange-traded fund strategist Jared Woodard said in a memo to clients that healthcare devices and services have historically been a winner for investors and that they see strong growth ahead. Stated. “Since 2006, HCES has become a ‘Goldilocks’ trade for investors seeking high-beta healthcare exposure without extreme volatility,” the memo reads. The company’s most highly rated ETF in this space is the iShares US Medical Devices ETF (IHI), which helps investors avoid the volatile biotech stocks found in broader healthcare sector funds. IHI’s expense ratio is his 0.39%, and its top holdings include Thermo Fisher Scientific and Abbott Laboratories. The fund has returned just under 8% so far this year, averaging 10.7% over the past five years. Over the last 10 years, the average total return has exceeded 15%. IHI 5Y Mountain IHI has averaged a total return of 10% or more over the last five years. Bank of America cited cooling inflation and the possibility of a recession as reasons medical technology could outperform in the future. The ETF is trading at higher-than-average earnings multiples in its history, which could be a concern in the event of a broader market downturn. But historically, industry-wide multiples actually look cheap compared to the broader market, Woodard said. What’s more, the industry has been particularly unpopular with investors in recent years, but that could reverse and give momentum to the fund, Bank of America said. IHI saw $432 million outflow this year, according to FactSet. “2023 could see a third straight year of HCES ETF outflows despite positive year-to-date returns (8.5%). It’s a lot less crowded than healthcare,” Woodard said. — CNBC’s Michael Bloom contributed coverage.
This ETF is best way to play a ‘goldilocks’ health-care sector
30
