Three Stocks to Buy in the Booming Health Care Sector

By  SEP 09, 2013 3:00 PM

Health care has been a leading sector since 2012. Laboratory Corp. of America, Health Net, and WebMD are three stocks in particular that have stood out.


The sharp 3.3% gain in the Shanghai Composite (SHA:000001) overnight has not yet translated to gains in Europe, where most of the major averages are a bit lower in early trading. The US market closed mixed on Friday,  but higher for the week.

The technical outlook did improve last week, especially on the Nasdaq 100 (INDEXNASDAQ:NDX) and Russell 2000 (INDEXRUSSELL:RUT), suggesting that the worst of the selling may be over. Clearly, the action over the next few weeks is likely to be choppy with the focus on the September 18 FOMC meeting.

One of my favorite sectors since 2012 has been health care, as the Select Sector SPDR Health Care ETF (NYSEARCA:XLV) has been one of the leaders in this double-digit year, as it is up almost 27% so far this year. This compares with a 17.73% YTD for the Spyder Trust (NYSEARCA:SPY). XLV was one of last week’s leaders, also up 2%, with SPY up just over 1.4%.

XLV looks as though it is ready to resume its uptrend and these three stocks, in this market leading sector, look attractive for new buying.

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Chart Analysis: The Select Sector SPDR Health Care dropped to a low of $48.82 at the end of August, which was a decline of 5.2%, from the high at $51.50.
Laboratory Corp. of America (NYSE:LH) is an $8.85 billion medical laboratory company that hit a high of $101.69 in June and then made its correction low of $95.36 in July. This was a drop of 6.2% from the highs.

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Health Net, Inc. (NYSE:HNT) is a $2.57 billion provider of managed health care plans that had a high in July of $33.70. The stock closed up 7.6% last week.
WebMD Health Corp. (NASDAQ:WBMD) is $1.64 billion company that provides health care information to consumers as well as health care professionals. The stock put in a strong performance last week on expanding volume.
What it Means: The technical action for the health care sector is positive from both a monthly and weekly perspective. The action last week suggests that the correction in the Select Sector SPDR Health Care ETF is over.

All of these three health care stocks look positive based on the weekly and daily technical indicators. We may not see enough of a setback in Health Net and WebMD and have to adjust the buy zones and stops later.

How to Profit: Portfolio Update: Investors should be long the Select Sector SPDR Health Care at $38.50 with a stop at $47.74.

Editor's Note: This article was written by Tom Aspray of MoneyShow.

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No positions in stocks mentioned.

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