$UnitedHealth(UNH)$  $Eli Lilly(LLY)$  $Novo-Nordisk A/S(NVO)$  $Hims & Hers Health Inc.(HIMS)$  

The valuation and performance of healthcare stocks relative to the broader market are at some of the lowest levels in decades. This is a critical distinction for investors.  ​Here's a breakdown of what the data shows:

​😬 Relative Underperformance is a Key Factor

For the past several years, the healthcare sector has significantly underperformed the broader market, particularly the S&P 500. While the S&P 500 has surged, driven largely by the "Magnificent 7" technology stocks, healthcare has largely stagnated or seen much more modest returns.  

​😬 Valuations are at Multi-Decade Lows

The most compelling argument for healthcare being "cheap" right now is its valuation relative to the rest of the market. The sector's price-to-earnings (P/E) ratio is at a steep discount to the S&P 500, with some sources citing a discount of 20% or more. This is a significant reversal from the past, when healthcare stocks often traded at a premium.  

REASONS FOR UNDERPERFORMANCE:

​🙄 Political and Regulatory Uncertainty

The ongoing debate in the U.S. about drug pricing and other healthcare policies has created a major headwind for the sector. This uncertainty can weigh on investor sentiment and make it difficult for companies to plan for the future.

🙄 ​Rotation to Tech

The immense rally in technology stocks has drawn a huge amount of capital away from defensive sectors like healthcare. Investors have chased the high-growth potential of AI and other tech innovations, leaving healthcare behind.  

​🙄 Operational Headwinds

The sector has faced challenges from rising costs due to inflation and labor shortages, which have squeezed profit margins for many companies, especially healthcare providers.  

​🙄 Post-Pandemic Shift

After a strong performance during the COVID-19 pandemic, some segments of the healthcare industry, such as companies that benefited from vaccine development or COVID-related testing, have seen a decline in demand and revenue.

CONCLUSION

Healthcare stocks are at a deep valuation discount compared to the rest of the market. For investors seeking to invest in defensive stocks, this could present an opportunity. The long-term fundamentals of the sector—an aging population, demographic shifts, and continued innovation—remain strong. The current low valuations may be an attractive entry point for those with a long-term investment horizon who are willing to look past the current political and economic headwinds (especially if we forsee another pandemic, which we likely will). 

So, buy the healthcare sector in peace times, to prepare for the surge in pandemic times. Get what I mean? Of course, do your own due diligence ya.

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