LIVE MARKETS-Try healthcare when it's in season again

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TRY HEALTHCARE WHEN IT'S IN SEASON AGAIN

With insiders buying up shares in healthcare companies, Jay Kaeppel, senior research analyst at Sentimentrader.com, looked at whether this should nudge other investors to jump into the sector, which has underperformed the broader market this year.

On a year-to-date basis, the S&P 500 .SPX has risen ~13% while healthcare .SPXHC is the weakest of the benchmark index's 11 major industry sectors, down ~0.4%. And it's not just this year, according to Kaeppel, who says that the sector has been "stuck in a range for 4 years."

But, looking at trends in the Health Care Select Sector SPDR Fund XLV.P, the analyst notes that corporate insiders "are arguably more bullish now than at any time in the last 15 years," with insider buying spiking up and insider selling plunging to a 15-year low."

"While corporate insiders are not known for 'precision market timing,' their recent activity bodes well for the potential for above-average performance for this sector in the next one to three years," Kaeppel writes.

The fact that corporate executives are putting their own cash into their own companies in the open market is "considered the best sign from insiders" and in the same vein, a drop off in insider selling can also be a positive signal.

"When both things occur simultaneously, it is a clear sign that insiders see better days ahead for their companies' stock," the analyst says.

However he argues that investors "may be wise to wait a while longer before joining in" as the sector is in its unfavorable seasonal period.

"The persistent nature of seasonal weakness in healthcare from late September into mid-October suggests that investors should check back in mid-October rather than take the plunge now," Kaeppel says.

So far on Friday, the SPXHC was in the middle of the pack, up 0.2%, roughly in line with the S&P 500 .SPX

(Sinéad Carew)

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