Mental HealthGood Bet In Market Pullback: Health-Care Shares
"As sentiment and the stock market increasingly look bearish, look for the recent outperformance in health care to continue," The Wall Street Journal reports. Health-care firms were "hardly a leader" during the "initial run of stocks following the March lows," but they also "fared much better during the market"s plummet. Last week, "health care was the one exception to a sliding market." Katie Stockton, chief market technician for MKM Partners, "says it is likely most of the health-care sector will outperform and not just large pharmaceutical companies" (Rogow, 6/23).
Business Week reports that health care"s reputation as a "defensive" stock market sector that "resists recession" is now "being put to the test. The result? More than a year into a nasty recession, health-care profits have barely budged. In the current scheme of things, that"s a pretty good performance." But deals and proposals for health care reform "could create major and unpredictable shifts in the way health care is paid for in the U.S," and many health care firms are "unquestionably feeling the effects of the economic slowdown." Walgreen, for example, "disappointed investors with lower-than expected earnings" as "higher costs ate into profit margins." Sales of prescriptions were up, "but sales results were weighed down by slow consumer spending in the rest of the store," and "the recession has only heightened competition between Walgreen and its rivals." And "even as it deals with the bad economy and a tough competitive landscape, Walgreen - like other health-care-related stocks - could be hugely affected by Obama"s health-care reform plans. The cost-cutting deal between Obama and drug companies is one sign of how much the sector"s profitability could be squeezed" (Steverman, 6/22).
Meanwhile, Dow Jones Newswires reports on a pharmaceutical analyst who "thought he knew all about the U.S. health-care system" until he was diagnosed with Hodgkin"s disease. "Now, with the cancer in remission, [Robert] Hazlett brings a deeper appreciation of patients" needs to his job." Hazlett says his illness has made him more sensitive to patient"s perspectives and has also "left him conflicted about the link between profits and life-saving drugs" (Loftus, 6/22).
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