The Healthcare Select Sector SPDR Fund ETF (XLV) has historically outperformed the S&P 500 Index and has been less volatile. The ETF has started to get back to its normal underperforming this year, likely due to the strong performance of the technology sector. Initial decline of biotech and healthcare stocks occurred largely because of common wrong belief, that with the decline in Covid-12 pace, instances and new virus strains, revenues of most medical developers will significantly drop. Actually, that was initially the case, but there were many paused studies devoted to developing many vital drugs, so now some of them were able to finally resume them, thereby pumping up investors’ expectations.

Consensus estimates suggest this ETF is likely to grow revenue and earnings per share over the next few years, pointing to a possible recovery. The main drivers are the aging population and their longer lifespan, sedentary lifestyles, and technological advances, which create a virtuous cycle of growing demand. To fund these promising drugs, devices and procedures, Americans rely on health insurance to complete or start their vitreous cycle.

The Healthcare Select Sector SPDR Fund ETF fits these characteristics and outperforms the S&P 500 (SPX) with lower volatility (less than 0.7 beta). However, this year it has remained almost unchanged while the market is up 24%, which represents significant negative alpha. XLV holds 64 stocks with over 20% upside potential: Merck (MRK), Bristol-Myers Squibb (BMY), and HCA (HCA).