The healthcare sector has had a rough stretch, with the S&P 500 Health Care index (XLV) dropping about 12% over the last year, even as the broader S&P 500 ($SPX) climbed more than 15%. U.S. healthcare stocks are now trading at their steepest discount to the rest of the market in three decades. The sector's forward price-to-earnings ratio is around 16x, well below the S&P 500’s 22x and much less than tech’s lofty 30x, which highlights just how undervalued healthcare is for the earnings offered.
AbbVie (ABBV) has climbed 17.25% year-to-date (YTD), well ahead of its sector, while Johnson & Johnson (JNJ) has returned a solid 22.04% in the same period. Both have delivered strong quarterly results; AbbVie posted $2.97 per share and Johnson & Johnson $2.77. With market values at $366.6 billion and $429.7 billion, they stand out as major players when much of the sector has struggled.
