How Have XLV’s Large-Caps Performed?



Reviewing XLV’s large-caps

The large-cap stocks of the Health Care Select Sector SPDR ETF (XLV) have been under pressure, collectively falling by ~1.8% as of March 15, 2016.

XLV has 49 large-cap stocks in its holdings, with a combined market capitalization of more than $10 billion. Among them, 47 stocks fell, and only two stocks rose on a difficult day for biotechnology and healthcare stocks. Large-cap stocks account for ~98.1% of XLV’s portfolio.

The above graph reflects the performance of XLV’s large-cap holdings compared to the SPDR S&P 500 ETF (SPY). From March 3–15, 2016, XLV large-caps returned -0.6%. SPY returned 1.7%, outperforming XLV’s large-caps.

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McKesson falls the furthest

The specialty pharmaceuticals sector was hit by Valeant Pharmaceuticals’ (VRX) drama. Valeant was delaying its 2015 earnings report and future guidance due to possible debt defaulting. This resulted in investors’ dumping shares, and the stock fell 51% in a single trading session. McKesson (MCK) also felt the impact. Its stock fell 4.7% on March 15, 2016.

McKesson closed at $157.30, below its 20-day moving average of $158.7. Its trading volumes were also high, with ~1.7 million shares being traded compared to its five-day average trading volume of ~1.2 million shares per day.

Year-to-date, MCK has given a return of -20.3%. It has a book value of $38.76 per share. With its current price, the stock is trading at a price-to-book value of ~4.1x and a 2016 forward price-to-earnings multiple of ~11.7x. Its peers AmerisourceBergen (ABC) and Cardinal Health (CAH) are trading at 2016 forward price-to-earnings multiples of ~14.9x and ~15.2x, respectively.

McKesson accounts for ~1.5% of XLV’s holdings.


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