The Markets Have Been Tricky Lately, Here's One Area That's Doing Just Fine

2021-08-20 | Mary Ellen McGonagle

It’s been a tough week as the markets bounce around in response to headline news. Both the Nasdaq and the S&P 500 broke below key areas of support on Wednesday, as fears of the Federal Reserve shifting an easy monetary policy spooked investors.

We’re also seeing weakness in the recent move back into Cyclical stocks as Materials, Financials, and Industrial stocks are down far more than the broader markets.

Beneath the surface however, there is a select area that is continuing to carve its way higher. I’m talking about Healthcare stocks, where the sector has outperformed the broader markets for the past 2 months, and they’re poised to continue higher for some time.

The primary driver? The growth prospects of stocks in this area are expected to stay strong regardless of the Fed’s policy or economic growth for that matter.

A continued spread of the Delta variant of Covid is the primary reason. Just this week, the U.S. advised booster shots for those vaccinated beginning September 20th which is expected to cause another huge output of vaccines.

Not only are vaccine providers such as Pfizer (PFE) or Moderna (MRNA) posting sharp gains, those companies that provide testing or vaccine delivery systems are also in strong uptrends, while companies that provide Covid treatments are also in rally mode.

West Pharmaceutical (WST) has been a big winner for subscribers to my MEM Edge Report, which we added as a buy several months ago. The company provides systems for injectable drug delivery systems, and demand for their products has surged over the past 2 quarters. The stock is in a confirmed uptrend, and it can be bought on a pullback to its 5-day moving average.

For those interested in participating in a broader list of related stocks, the VanEck Vectors Pharmaceutical ETF (PPH) can be an ideal vehicle. This ETF counts vaccine provider Pfizer (PFE) among its top holdings, as well as Eli Lilly (LLY), whose Covid drug was authorized 3 weeks ago.

PPH remains in a confirmed uptrend, and it can be bought on a pullback to its 21-day moving average.

The iShares U.S. Medical Devices ETF (IHI) is another way to participate in the rally among Covid related stocks. Among its top holdings is Thermo Fisher Scientific (TMO) who is a provider of Covid testing which includes a home testing kit. This ETF also holds top growing Medical stocks such as Edwards LifeSciences (EW) which provides heart valve replacement products that are in high demand among an aging population.

EW is another big winner for those subscribed to my MEM Edge Report, as we recommended the stock several months ago and it remains in a strong uptrend. EW has a 5% representation in the ETF IHI.

While Healthcare stocks remain in an uptrend, other areas of the market are also experiencing gains due to strong earnings reports this week. This is good news for a wobbly market, as several headline stocks in both Technology and Retail are seeing rallies into their reports next week.

If you’d like to be kept on top of this underlying strength as well as insights into where the broader markets are headed, trial my bi-weekly MEM Edge Report for 4 weeks. You’ll also receive immediate access to current reports all for a nominal fee of $7.00.