Premium valuations get there for a reason

Deutsche Bank is out with some dour news on Q1 earnings trends. They note that only 62% of the 201 S&P 500 names that have reported through Friday are beating Street estimates on profit while an embarrassing 31% are beating on revenue. DB notes that this sets up the quarter for 0% year-over-year growth. And this is before the bulk of the energy sector’s reports get underway.

One bright spot is the Health Care sector, which has been leading the market for a while and the first place the skeptics will point to as being in a bubble. I think it’s fair to say that health care stocks are expensive relative to the market and to their trailing 12 months’ earnings, but is this, by definition, proof of a bubble?


It’s proof of one simple fact: Health care companies are crushing right now, both relatively and absolutely. They’ve delivered a total return over the last 12 months north of 30% while the S&P 500 has done closer to 15%. The justification for this outperformance comes in the form of fundamentals…

via Midway 1Q earnings season update: Barely clearing a low bar (Deutsche Bank – April 26th 2015):

Health Care is delivering the best sales growth of all the S&P. It had 15%+ EPS growth on 10%+ sales growth in 2Q14–4Q14. Operationally this strong growth continued in 1Q, as despite FX headwind, blended EPS and sales growth is now 10%. All Health Care industries are posting double digit sales growth except Pharma and Life Sciences Tools & Services. Biotech leads with 23% y/y sales growth and 44% EPS growth.

We believe strong sales/EPS growth trends at HC will continue. It is trading only 1pt higher than S&P 500 on 2015 EPS, but it is not cyclical and has significant PE upside if real long-term bond yields stay well below history as the Fed hikes.

My chart below is the XLV:SPY ratio chart, which has been trending higher since Blurred Lines was on the radio every 15 minutes and has barely missed a beat through the Uptown Funk / Shake It Off era. In the panes below, price performance (%) for the XLV Healthcare Sector SPDR followed by price performance (%) of the SPY itself.


Premium valuations get there for a reason, premium performance too.

Oh, also I think we can stop referring to the health care sector as “defensive” at this point too. They’re not exactly selling girdles and goiter pills anymore.



What's been said:

Discussions found on the web
  1. mtproto تلگرام commented on Sep 14

    vpn ایفون

    I definitely really like your weblog and discover a great deal of your post’s to be specifically I’m hunting for. Does one supply guest writers to create content accessible for you? I wouldn’t mind producing a submit or elaborating on a few of the subj…

  2. Stepfamily Porn Online commented on Sep 14

    Stepfamily Porn Online

    […]we prefer to honor quite a few other world-wide-web web-sites on the internet, even when they aren’t linked to us, by linking to them. Below are some webpages really worth checking out[…]

  3. houses for sale in downey ca commented on Sep 16

    houses for sale in downey ca

    […]Wonderful story, reckoned we could combine several unrelated data, nonetheless definitely worth taking a search, whoa did one particular study about Mid East has got much more problerms at the same time […]

  4. Dolce and Gabbana commented on Sep 16

    Dolce and Gabbana

    […]just beneath, are many absolutely not associated internet sites to ours, however, they are certainly really worth going over[…]

  5. سكس مترجم commented on Sep 17

    سكس مترجم

    […]here are some links to web pages that we link to mainly because we think they are worth visiting[…]

  6. Jimmy Choo commented on Sep 17

    Jimmy Choo

    […]one of our visitors not too long ago advised the following website[…]

  7. Givenchy commented on Sep 18


    […]Here is an excellent Blog You may Discover Exciting that we Encourage You[…]

  8. خرید vpn commented on Sep 19

    vpn ایفون

    beneath you will arrive across the website link to some net-sites that we take into account it is greatest to visit

  9. خرید اکانت وی پی ان commented on Sep 20

    vpn ایفون

    Fantastic weblog! I found it while surfing close to on Yahoo News. Do you have any suggestions on how to get detailed in Yahoo News? I have been striving for a while but I by no means look to get there! Cheers

  10. خرید vpn commented on Sep 21

    vpn ایفون

    Write more, thats all I have to say. Virtually, it appears as although you relied on the movie to make your point. You obviously know what youre talking about, why squander your intelligence on just posting movies to your internet site when you could b…

  11. سرویس vpn commented on Sep 21

    vpn ایفون

    we arrived across a amazing site that you just could probably delight in. Consider a appear in case you want

  12. land for sale in lagos commented on Sep 21

    land for sale in lagos

    […]Here are some of the web sites we advocate for our visitors[…]

  13. سرویس vpn commented on Sep 23

    vpn ایفون

    Sohan is also getting accused of leaving the jurisdiction in December previous yr without authorization.

  14. Armani parfum commented on Sep 23

    Armani parfum

    […]just beneath, are numerous totally not related websites to ours, nonetheless, they’re certainly really worth going over[…]