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Investors can find success in the healthcare equipment and services industry
A strong track record and potential for growth
Bank of America suggests that a health care fund with a strong track record could be a good investment option for those looking to minimize risk. Investments and ETF strategist Jared Woodard notes that the health care equipment and services industry has been a winning choice for investors in the past and is poised for further success. Since 2006, the industry has provided high-beta healthcare exposure without excessive volatility.
The top rated ETF
The iShares Medical Devices ETF (IHI) is Bank of America's top-rated ETF in the health care equipment and services space. This fund helps investors avoid the volatile biotech stocks that are commonly found in broader health care sector funds. With an expense ratio of 0.39%, the IHI has delivered a total return of just under 8% this year and an average return of 10.7% over the past five years. Over the past decade, the average total return has exceeded 15%.
Factors contributing to potential outperformance
Bank of America lists cooling inflation and the possibility of a recession as factors that could drive medical technology to outperform in the future. While the IHI is currently trading at a higher earnings multiple than its historical average, its multiple actually appears cheap compared to the broader market. Furthermore, the industry has not been popular with investors in recent years, which could reverse and give the fund a boost. The IHI has experienced outflows of $432 million this year.
Less crowded than broad healthcare
Despite its positive returns this year, the HCES ETF has seen outflows for the past two years. However, Bank of America believes that this trade is less crowded than broad healthcare, making it an attractive option for investors seeking defensive exposure. With its potential for growth and a track record of success, the health care equipment and services industry presents an opportunity for investors looking to diversify their portfolio.
Conclusion: A Hot Take on the Impact for New Businesses
The thriving healthcare equipment and services industry presents more than just investment opportunities; it also holds great potential for new businesses entering the market. The strong track record and potential for growth make this industry an attractive space for entrepreneurs looking to make their mark.
With the healthcare equipment and services industry consistently providing high-beta exposure without excessive volatility since 2006, it showcases a stable and reliable environment for new businesses to thrive. This track record of success indicates a supportive ecosystem for innovation and growth.
Moreover, the top-rated iShares Medical Devices ETF (IHI) offers investors a way to tap into this industry while avoiding the volatile nature of biotech stocks. The IHI's average total return of over 15% in the past decade showcases the long-term potential for profitability in this sector.
Factors such as cooling inflation and the possibility of a recession further contribute to the outperformance of medical technology, potentially creating an advantageous environment for new businesses. Additionally, the industry's lack of popularity among investors in recent years presents an opportunity for new ventures to gain traction and secure a competitive edge.
Furthermore, this trade in the healthcare equipment and services industry is less crowded than the broader healthcare sector. For new business owners seeking defensive exposure, this presents a unique opportunity to establish themselves in a niche market and differentiate from the competition.
In conclusion, the healthcare equipment and services industry not only offers promising investment potential but also serves as a fertile ground for new businesses. Entrepreneurs considering entering this sector can leverage its strong track record, potential for growth, and relative lack of competition to establish themselves and capitalize on the dynamic and prosperous healthcare market.
Article First Published at: https://www.cnbc.com/2023/07/28/this-etf-is-the-best-way-to-play-a-goldilocks-health-care-sector-bank-of-america-says.html.svg)
