November 13, 2013
This is a question I've received a lot lately, so let's take a moment to review what I consider to be the best sector bet right now.
Unfortunately, there isn't a clear answer at this time. As the market moves higher the distinction between sectors is breaking down. But if I had to choose, I'd opt for biotechnology and pharmaceutical plays in the healthcare sector. Are all companies flying high? Of course not. But we are seeing broad-based strength in this sector that is very encouraging.
Why is the healthcare sector so promising? Well, pharmaceutical, biotech and other healthcare companies are the major beneficiaries of a seismic demographic shift: The first baby boomers (born in 1946) turned 65 in 2011. And there are more than 10,000 baby boomers turning 65 today and every day for the next 19 years! There's a total of 77 million of them that are going to need drugs to keep up with their active lifestyles.
This will lead to an explosive increase in the demand for health care… and huge profits for drug companies, testing labs and health insurance providers that profit from government payouts through Medicare. According to the regulatory agency behind Medicare and Medicaid, healthcare spending is expected to grow by an average of 5.8% per year through 2020. And that's not all: The same agency also forecasts that healthcare spending will make up a whopping 20% of GDP in eight years.
While many drug companies, biotech firms and insurance companies will profit from this increased spending, not all players will fly as high. So before you rush out to load up on healthcare plays, I'd recommend you click through these pages for a few minutes to get caught up on the highest rated stocks in Portfolio Grader in: Biotechnology, Pharmaceuticals, Life Sciences and Health Care Equipment.