Healthcare stocks thrive amid recession fears

Health insurers, medical device makers, Big Pharma among top market performers; seen as resilient in the face of market turmoil.

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By Aaron Smith, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- As the market flirts with recession, many of the top performers are healthcare providers, suggesting that the sector could be returning to its old reputation as a safe port in a storm.

"Traditionally in times of economic turmoil, healthcare is a place to run, because it is viewed as a safe sector, because people continue to use [healthcare] even in difficult times," said Angela Maria Larson, drug industry analyst for the Susquehanna Financial Group.

The numbers bear her out. The American Stock Exchange Pharmaceutical Index is up more than 3 percent this year, while the exchange as a whole is flat. Of the top 10 performers listed in Thomson Financial's Baseline, six are healthcare companies.

"[The healthcare sector has] underperformed for the last year or so, so we're at a point where it's becoming a safe harbor at attractive valuations," said Larsen, who believes that the trend will continue.

Drugmaker King Pharmaceuticals (KG) was second-best on the S&P, year-to-date, beaten only by Barrick Gold (ABX), a mining company that deals in the ultimate safe haven commodity. King stock leaped nearly 17 percent in that period, bolstered by a patent settlement.

Other top performers include Humana (HUM, Fortune 500), a health care insurance provider with a 14 percent stock jump year-to-date, Baxter International (BAX, Fortune 500), a maker of drugs and medical devices that rose more than 10 percent and Becton, Dickinson (BDX, Fortune 500), a medical device maker with a 9 percent run. The drugmakers Wyeth (WYE, Fortune 500) and Abbott Laboratories (ABT, Fortune 500) each rose about 7 percent in that period.

Other strong performers so far include the biotech Genzyme (GENZ), the medical device maker St. Jude Medical (STJ) and the drugmakers Eli Lilly (LLY, Fortune 500), Pfizer (PFE, Fortune 500) and Merck & Co. (MRK, Fortune 500)

"Clearly, there is some sector shifting going on right now and you're seeing money flow into the health care sector," said Peter Costa, analyst for FTN Midwest Securities Corp., who covers health insurance.

Other sectors remain troublesome. The mortgage and banking industries are taking a beating, holiday retail sales were weak, unemployment is up and oil prices are high. But while many analysts believe that the U.S. economy is in a recession and see consumers willing to cut spending in some areas, they see healthcare spending as essential.

"The [pharmaceutical] industry has its risks, however it is not sensitive to the economy," said Barbara Ryan, drug industry analyst for Deutsche Bank North America. "Hence the appeal." To top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.