Health-care stocks have been making waves in 2024, emerging as the top-performing sector in the S&P 500. Analysts on Wall Street are taking notice of this strong start and are growing increasingly bullish on health-care stocks. The attractive valuations relative to earnings and a compelling growth story have been cited as reasons why health-care stocks are expected to continue outperforming.
Eli Lilly Leads the Way
Among the health-care stocks, Eli Lilly has emerged as the best performer, with an impressive rise of 78.1% in 2023. This remarkable growth has earned the drugmaker a prestigious spot among the top 10 most valuable companies in the S&P 500.
A significant factor contributing to Eli Lilly's success is its groundbreaking drug called Zepbound. This innovative product, competing with Novo Nordisk's Ozempic and Wegovy, has already garnered considerable attention. In fact, the CEO of Eli Lilly reports that weekly prescriptions for Zepbound have reached an impressive 25,000.
The Rising Stars
While Eli Lilly dominates, other health-care names are also making their mark. Notable mentions include health insurers such as UnitedHealth Group Inc., pharmaceutical giants like AbbVie Inc., Viatris Inc., medical-device makers like Dexcom Inc., and Danaher Corp., as well as distributors like McKesson Corp.
Technical analysts have recently observed a promising trend known as the "golden cross" in several of these health-care stocks. A golden cross occurs when the 50-day moving average of a stock or index surpasses its 200-day moving average—an optimistic signal according to technical analysis. Renaissance Macro's Jeff DeGraaf highlights this trend, providing further reason to be upbeat about the sector's prospects in 2024.
In conclusion, health-care stocks have started the year with a bang, capturing the attention of investors and analysts alike. With Eli Lilly leading the charge and other key players joining the race, the future looks bright for the health-care sector in 2024.
The Health-Care Sector Shows Promising Growth in 2024
The health-care sector has witnessed a remarkable surge in recent months, reaching a significant milestone in the first week of January. According to FactSet data, the entire sector experienced a golden cross, reflecting a sustained rally that has been ongoing for several months.
After hitting a 52-week low on October 27, health-care stocks have since risen by over 14%, as reported by Dow Jones Market Data. Notably, the sector has achieved its ninth consecutive weekly gain, marking the longest streak of weekly gains since December 2019's 11-week run.
In late 2023, analysts such as Jonathan Krinsky from BTIG began to highlight the favorable valuations of health-care stocks. At the time, the sector maintained a price-to-earnings ratio of approximately 18. Although the sector's performance in 2023 was modest, finishing the year with marginal gains according to FactSet data, it has now become Krinsky's "highest-conviction idea."
Since the start of 2024, the health-care sector has already demonstrated a notable growth of 3%, significantly outperforming its meager 0.3% gain throughout the entirety of 2023 (as per FactSet data). In comparison, the S&P 500 rose by 24.3%.
Krinsky remains optimistic about the sector's future prospects and suggests that the SPDR Health Care Select Sector ETF XLV, which tracks the health-care sector, has the potential for further gains. He predicts that it may surpass its previous record from April 2022 when the ETF closed at $142.83 (according to Dow Jones data).
Nonetheless, even without reaching new milestones, the health-care sector has already experienced a promising start to 2024. In fact, it has had its best start to a year since 2018 when health-care stocks achieved a 5% gain at the beginning of the year (Dow Jones data).