PAYING ATTENTION TO INDUSTRIAL SUB-SECTORS

It is quite important to know what is inside your investment portfolio. There are ten general Industrial Sectors (i.e. Financial, Consumer Staples, Technology, etc.) that the S & P 500 Index can be divided into. Within each of those Sectors, however, there are a range of different types of corporations. When you review your Portfolio, either by yourself or with a Financial Advisor, it is important to have, at least, some idea as to what you own in a particular Industrial Sector. Don’t be satisfied by just knowing the overall asset classes (i.e. stocks, bonds and cash).

By now, just about everyone knows that the Supreme Court upheld President Barack Obama’s Affordable (Health) Care Act (ACA) yesterday. Most people, when they review their portfolios try to have some of the stock portion invested in, at least, some different Sectors–in order to provide some diversification. But, you should look a bit further. Let’s look at how Health Care stocks reacted to yesterday’s Court Decision.

Before the Decision was announced, the Dow (DJIA) was down by approximately 150 points, and it dropped another 25 points after the Court Announcement; however, it rallied on “Good News” from the EuroZone within the last 30 minutes of the trading day–closing by down only 25 points. An article, by Andrew Pollock and Katie Thomas, titled “In Health Care Ruling, Investors See a Mixed Blessing”, http://www.nytimes.com/2012/06/29/business/insurance-stocks-flag-hospital-shares-gain.html?ref=business describes this basic issue.

As the article points out, Hospital stocks are expected to gain Millions of paying customers with ACA. Health Insurers could see Profit Margins crumpled from restrictive rules. Makers of Medical Devices and Pharmaceuticals will face new taxes and higher payouts; however, the impact on the last two–since they were expected–appears to already have been built into the stock prices. So, as a response to yesterdays ruling, Hospitals surged, insurers dropped and device and pharma hardly moved at all.

Advertisements

  1. Leave a comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: