uploads///Performances of Healthcare Stocks

SPY Heavy as UnitedHealth Group Forewarned Profit


Nov. 20 2015, Published 12:58 p.m. ET

Healthcare sector weighs down SPY

The healthcare sector represented by the Health Care Select Sector SPDR ETF (XLV) tumbled -1.7% on November 19, 2015. The fall in the healthcare sector came after UnitedHealth Group (UNH) lowered its profit expectations for 2015 and cut down its earnings forecast. The health insurer also hinted that it might quit the business due to high associated costs. The company is anticipated to withdraw from ObamaCare coverage offerings as the business is not profitable as expected.

This announcement by the company rattled stock prices of other companies involved in managed healthcare or healthcare facilities, as investors feared similar profit issues with these insurance companies.

Therefore, stocks of Aetna (AET), Anthem (ANTM), Universal Health Services-B (UHS), and Tenet Healthcare (THC) also fell. These stocks fell by 6.5%, 6.9%, 4.3%, and 8.0%, respectively, on November 19.

The graph above presents the stock price movements of UnitedHealth Group (UNH) and Anthem (ANTM) versus XLV since October 2015.

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In-depth analysis

Stocks of managed healthcare and facilities services, namely, UnitedHealth Group (UNH), Aetna (AET), Anthem (ANTM), Humana (HUM), Cigna (CI), Universal Health Services-B (UHS), HCA (HCA), and Tenet Healthcare (THC), all have their respective beta as less than 1. This means that these stocks are less volatile to the broad market movement.

However, the stocks above responded in alignment to the sector movement wherein investors feared similar profit issues with these health insurers as faced by UNH. The average of the trailing-one-year returns of these stocks is 6.7% while the Relative Strength Index (or RSI) is in the range of 30 to 45. This implies that these stocks are neither overbought nor oversold. The analyst stock price targets are above the respective settling prices of the stocks, indicating upward potential in the stock prices. These stocks have garnered an average 14 “Buy” recommendations, seven “Hold” recommendations, and no “Sell” recommendations.

Now let’s also look at the other healthcare events of the day that hogged the limelight, as well as the performances of other component sectors of the SPDR S&P 500 ETF (SPY) on November 19.


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