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Up 450% in Health Care Stocks – More Gains to Come

By Dr. Steve Sjuggerud
Tuesday, April 28, 2015

Subscribers to my True Wealth newsletter are up 450% so far on health care stocks...
 
You might think – after a 450% run in four years – that the good times have to be nearly over, right?
 
You might think that it's time to take your profits... You might think that asking for any more profits would be getting greedy.
 
You are free to think that way. But I disagree...
 
Just over four years ago, I recommended buying the ProShares Ultra Health Care Fund (RXL) in my newsletter. So far, RXL is up 450%.
 
Regardless of those gains, I have kept a "buy" recommendation on RXL this year.
 
So far, health care stocks have been a strong outperformer... The overall U.S. stock market is up about 3% this year. But RXL is up 15% year-to-date.
 
Isn't it finally time to sell? No, actually...
 
Health care stocks aren't particularly overpriced, yet. But that's not what has me excited about the upside potential. What excites me is that investors are still scared of health care stocks...
 
Markets and sectors tend to peak when everyone is optimistic... when there are no pessimists left. Importantly, we are seeing the opposite of that in health care stocks today.
 
For example, right now, the "put-to-call ratio" in health care stocks is at 4.6 – the highest level since early 2007. (This means that there are 4.6 times as many bearish bets as there are bullish bets on the main health care exchange-traded fund – symbol XLV – according to options analytics firm Trade Alert.)
 
You don't hear a lot about the put-to-call ratio... But when I asked Jason Goepfert – the guru of investor sentiment – what his "desert island" sentiment indicator was... meaning that if he could only take one sentiment indicator with him... he said he liked the put-to-call ratio.
 
Jason measures sentiment in health care stocks differently than Trade Alert does – but Jason's main sentiment gauge for market sectors says that health care is currently the second-most hated U.S. sector right now. (You can learn more about Jason's indicators at www.SentimenTrader.com.)
 
In short, markets and sectors peak when they are overly loved... Health care stocks are in the opposite boat today... They are somewhat hated today.
 
Yes, my subscribers are up 450% in health care stocks. But no, we are not at the peak in health care stocks yet.
 
Hopefully this example is good proof to you that you don't want to sell a stock just because it has gone up.
 
You need to evaluate where it can go. Today, health care stocks are not overly expensive yet... They are somewhat hated... And they are in an uptrend. Based on those three things – even though we are up a lot – we have what we like to see in an investment.
 
We are staying on board in health care stocks...
 
Good investing,
 
Steve




Further Reading:

Steve recently mentioned two more opportunities he likes right now:
 
U.S. stocks are up big over the last four years... but this index of stocks is down nearly 80%.
 
This market is up more than 100% in the last year... And as one legendary investor says, it could either double from here or fall in half...

Market Notes


THIS "GOOD FOR AMERICA" STOCK IS STILL SOARING

Shares of Walt Disney (DIS) just set a new all-time high... and that's good news for America.
 
Over the past few years, we've profiled the soaring bull markets in home-improvement stocks, hotel stocks, and financial stocks. We figure that if these sectors are enjoying rising profits and soaring stock prices, the economy can't be doing all that bad.
 
Another great sign is the recent business and share-price performance of Disney, one of America's largest media and entertainment companies. When folks have enough money to spend on cable TV, movies, and vacations, Disney prospers. It is THE iconic brand in American entertainment. Thus, its share price is a solid gauge of what's going on with the economy.
 
Today's chart shows things are still going well. Shares are up nearly 170% in the past three years... and just hit a new all-time high yesterday. We look at Disney's rising revenues and soaring stock price and say, "things can't be that bad" in America.
 

premium teaser

One health care blue-chip to consider today...
 
Dr. David Eifrig especially likes companies that reward shareholders... And one health care blue-chip company sits at the top of that list...
 

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