5 Great Medical Stocks To Buy Ahead Of Q4 Earnings

In 2018, health care stocks emerged as some of the best performers for the S&P 500, which itself closed the year in the red. Looking ahead, multiple headwinds are clouding the market outlook for the year 2019. These include the ongoing trade war with China, the interest rate situation and concerns about an impending global slowdown.

In the absence of a strong aggressive strategy to boost gains, it is better to adopt a strong defensive tactic to shore up hard-won profits. Health care fits the bill perfectly since it offers defensive growth over the longer term. This is why it is a good idea to pick up select stocks from the sector that are likely to outperform their earnings estimates.

Most Favored S&P 500 Sector of the Year

A Reuters review of 13 prominent Wall Street Research firms reveals that health care is the most favored of the S&P 500’s 11 major sectors at the start of 2019. These firms issue recommendations about what weight is to be assigned to these groups in investment portfolios.

Notably, in 2018, health care stocks in the S&P 500 gained 4.7%. Along with utilities, it was only of the two S&P 500 sectors to close 2018 in the green. The benchmark itself lost 6.2% last year.

A large section of analysts think the sector’s attractive valuations, sturdy balance sheets, and steady dividends are major factors working in its favor. The group’s positive earnings outlook is another major positive even as it remains less vulnerable to cyclical downtrends compared to other sectors.

When the economy faces a slowdown, most investors avoid sectors that benefit from an upswing. However, they do not want to adopt an ultra-defensive stance. Health care fits the bill nicely with its diversified earnings stream, which helps in striking a healthy balance between risk and returns.

Diversified Earnings Stream Strikes Healthy Balance

The diverse nature of health care’s earnings stream stems from the variety of business under its huge umbrella. The sector’s width spans prescription drug makers, medical device manufacturers, medical insurers, hospitals and tool providers for scientific research.

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