Jon VialouxiShares US Healthcare E.T.F.IYHCOMMENTJun 11, 2015

There are improvements in MLR (Medical Loss Ratio) expectations for managed-care companies, and potential clarity around Medicare Advantage.

There's offence and defence here.

Aetna's medical loss ratio (MLR) came in lower than expected and sees that for similar companies and a boost for this sector.

Healthcare has been weak this year, but next year it can play offence and defence.

Healthcare has had a rough year, but economic softening could lead to a rotation back into this sector.

Allan Tong’s Discover Picks IYH stock tracks the Dow Jones U.S. healthcare sector and counts (in this order) Johnson & Johnson (9.05% weight), UnitedHealth Group, Merck, Pfizer, AbbVie, Abbott Labs and Thermo Fisher as its top holdings. IYH stock charges a 0.43% MER and pays a 1.21% dividend yield. Like many of its holdings, IYH stock offers a low beta (0.78). Average volumes are a little light at 69,000, but not a worry. YTD, IYH has climbed nearly 10%. Read NEE Stock and BABA Stock: 3 Savvy Election-proof Stocks for our full analysis.

He thinks the drivers behind the healthcare sector are as powerful today as they were 6 months ago. However, the environment has been changing, where you need to be more of an active manager, understanding which asset mix makes sense. This is a passive ETF, so you are subject to the whims of the largest names. You should have exposure to the sector, but try to identify something that is more actively managed.

(A Top Pick July 3/15. Down 2.08%.) Sold about 2 months after he had picked it. Didn’t like what was happening in the US elections. Will probably look at getting back into a name like this in November.

As we get closer to the US elections, this is probably a good time to start building a position.

A sleeping giant that he has had in his portfolio for a long time. He recommends that you read Byron Wien’s piece about innovation, biotech, healthcare. This ETF has great holdings. 40% exposure to pharmaceuticals, 25% exposure to the biotech sector, a well-rounded portfolio of names. In the past, these names have been thought of as a defensive kind of positioning, but feels they have slowly moved into the growthy areas of the markets, with huge innovations in medical and biotech. In a rising rate environment, if you are looking for something that is defensive but participates with a bit of growth, this might be a really attractive place to hide out.

For the last decade investors have been thinking about healthcare and talking about demographics. For a long time healthcare companies in North America didn’t do much, but that really changed in the last 1.5-2 years. Thinks this is the beginning of a longer-term trend, and we will see continued growth in the healthcare industry. For a long-term proposition, this is not a bad place to be.