Select health care
are outperforming the broader market today, though that is not
saying much given that the S&P 500 is down almost 1.9 percent
as of this writing. Two examples of the sector's post-Election
Day outperformance include the Health Care Select Sector SPDR
) and the Market Vectors Pharmaceuticals ETF (NYSE:
), which are off 1.6 percent and one percent, respectively.
The relative sturdiness of PPH, XLV and rival ETFs is no
surprise following President Obama's easy reelection victory
Tuesday night. Leading up to the election, it was widely expected
health care ETFs would be beneficiaries of a
second Obama term
as traders speculated Republican rival Mitt Romney might try to
undo Obamacare if elected.
XLV, which is heavy on blue-chip pharmaceuticals names such as
Johnson & Johnson (NYSE:
), Pfizer (NYSE:
) and Merck (NYSE:
was highlighted by analysts as one ETF
should embrace should Obama win.
However, while XLV, PPH and comparable might eventually keep
their bull runs going in the wake of Obama's easy Tuesday night
victory, one sub-sector of the health care space looks
vulnerable. That being medical device manufacturers.
In March, Benzinga reported that medical device makers and the
corresponding ETFs could be traders' cross-hairs if Obamacare was
implemented to its fullest extent. As a study by the
Battelle Technology Partnership Practice
highlighted, Obamacare contains a job-killing, GDP-sapping tax on
medical device makers.
which appears to be non-partisan
, said the medical device featured in Obamacare could lead to the
loss of tens of thousands of jobs and billions of dollars of lost
GDP for the U.S.
On a related note, it appears at least some traders realize
medical device names need to be avoided, at least in the
near-term. The iShares Dow Jones U.S. Medical Devices Index Fund
) is off almost 2.1 percent today. The rival SPDR Health Care
Equipment ETF (NYSE:
), which is more of an equal product, is lower by the same
To be sure, these are not the most popular ETFs on the market.
IHI and XHE combine for less than $294 million in assets under
management. The former's average daily volume is less than 41,000
shares per day. XHE's average daily turnover is barely above
Still, these ETFs are home to some of the most familiar names
in the medical device sub-sector. For example, Medtronic (NYSE:
), Intuitive Surgical (NASDAQ:
) and St. Jude Medical (NYSE:
) combine for over 23 percent of IHI's weight. Medtronic is down
almost three percent today while St. Jude is approaching a four
Practically speaking, dangers loom for IHI and XHE. Arguably,
many investors are not aware of the "stealth" medical device in
Obamacare. President Obama would not have been wise to run around
touting the tax and he did not. Investors might also be apt to be
an ETF such as IHI as a success under the first Obama term. After
all, in three-year period ending on Election Day, the ETF had
surged almost 41 percent, including paid dividends.
It is that performance that might explain why the medical
device tax got so little mainstream media coverage in the days
leading up to the election. The Wall Street Journal and USA Today
did prominently mention the issue, but it was not exactly on
display in other major mainstream media outlets.
Fortunately for investors, the IHI and XHE gave some clues
that departure time was drawing near. In the month leading up to
Election Day, XHE plunged 6.3 percent, more than double IHI's
loss. The ETF's are giving more clues today. If IHI drops another
one percent, it will dip below its 200-day moving average and
that is a bearish sign.
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(c) 2012 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.