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ETF Specialist

Treat the Health Reform Blues with This ETF

Not all areas of the health-care sector would be under the same pressure should sweeping regulation pass. This ETF targets one of them.

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The stock market posted another strong month in July, with the Dow and S&P 500 indexes notching gains of 8.6% and 7.4% for the month. After a 46% rally in the S&P since hitting its March 9 lows, the margin of safety offered by Mr. Market has shrunk significantly. Dissecting the market's recent moves reveals that cyclical stocks have led the surge--materials, consumer discretionary, and industrials posted market-beating July gains of 13%, 9.4%, and 9.2%, respectively. Hence we turned our attention to one sector of the market that has lagged: health care.

Certainly, the tremendous amount of uncertainty surrounding the potential effects of the various health-care reform proposals being batted around in Washington is weighing on the sector. However, even in the event that wide-sweeping reform gets signed into law, we don't think that all aspects of the health-care sector will be under the same pressure. Below we highlight one of our favorite health-care plays and explain why we think it is relatively insulated from many of the concerns plaguing the sector.

John Gabriel does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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