With valuations on the expensive side and earnings slowing due to a strengthening dollar, now is the time to get defensive and own sectors like healthcare, said Michael Ball, portfolio manager for Weatherstone Capital Management. ‘The demographics remain quite positive and when we look at the cash flows that have been moving into healthcare, it’s remained consistent for quite some time,’ said Ball. Health care had the strongest earnings and revenue growth in the first quarter among the 10 major sectors and Ball expects that outperformance to continue for the rest of the year. He also sees as a positive sign the increase in M&A activity among healthcare companies, particularly in the drug industry, which has exceeded 20% of the total M&A volume for the past two quarters. Ball said the Vanguard Health Care ETF (VHT) is a good way to gain exposure to the sector. The VHT is up 11% year-to-date and over 27% in the past 12 months.
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