Its time to put Healthcare back on the radar

Key Points:

• The Healthcare sector has rarely performed worse relative to the S&P 500 Index; While this may be quite frustrating to current holders of healthcare stocks, the current level of relative underperformance may prove to be an excellent buying opportunity for this underperforming sector
• Healthcare sector corporate insiders are arguably more bullish now than at any time in the last fifteen years, as insider buying has spiked and insider selling has plunged
• In addition, several breadth and sentiment indicators have recently flashed favorable signals
• While the current confluence of signals does not guarantee an immediate and substantial rise in healthcare stock prices, it strongly suggests that investors may look back on this period as a significant buying opportunity

Healthcare has been a laggard, but insiders are betting heavily on a turnaround

The healthcare sector has been an obvious laggard in recent years. While the S&P 500 and many other sectors have advanced, the healthcare sector has yet to reach a new high. The top clip below shows performance for SPY and XLV. The bottom clip shows XLV performance relative to SPY. As you can see, this ratio has plunged to multi-decade lows.