REUTERS/Marko Djurica
- Healthcare stocks are the best value sector to buy right now, according to Goldman Sach’s David Kostin.
- The sector is trading at its lowest relative valuation in at least 40 years, the bank’s chief US equity strategist said in an interview with CNBC on Thursday.
- The bank upgraded the entire healthcare sector from underweight to overweight earlier this week, citing the lack of a blue-wave election outcome as a positive sign for the sector.
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In the middle of a pandemic, an unsuspecting stock sector is offering enormous value: healthcare.
The sector is trading at its lowest relative valuation in at least 40 years, according to Goldman Sachs’ David Kostin. The chief US equity strategist told CNBC on Thursday that investors looking for value stocks with upside should seek out the healthcare sector.
“Healthcare is the best opportunity from a value perspective,” he said. “They’re the cheapest they’ve been, so that’s an area of focus.”
Earlier this week, Kostin’s team upgraded the sector from underweight to overweight. Goldman had previously anticipated drug price regulations and tax increases to be major headwinds to the sector under a unified Democratic government. Now the election results make it less likely that those major policies will be implemented.
The sector has rallied 6% since November 3, according to Goldman, but it’s still trading at a bargain.
“The healthcare sector now trades at its largest discount to the S&P 500 in at least 40 years, rivaled only by the roll-out of the Affordable Care Act a decade ago and the proposal of the Clinton health care plan in the early 1990s,” it said.
Goldman lifted its year-end S&P 500 target to 3,700 and it’s mid-2021 forecast to 4,100 in the Wednesday note. The strategists recommend a “barbell” portfolio strategy to clients with both value stocks like healthcare and long-term secular growth stocks in sectors like information technology.
