Healthcare stocks punching way above weight

Healthcare stocks are on a roll, according to MarketWatch, which concluded that the S&P 500 healthcare stock sector has outperformed the broader S&P every year for the past five years.

Indeed, Bloomberg reported that healthcare stocks are up 12 percent in value during the 2015 calendar year. And the healthcare portion of the S&P 500 represents $3 trillion in value, or roughly 15 percent of the index's entire value.

As a result, healthcare stocks should no longer be considered a "defensive" pick--the kind of asset investors should turn to when the going gets rough in the broader financial markets. Stock analysts attribute the recent boom in the healthcare sector to the Affordable Care Act (ACA), which has insured millions of more patients, as well as profits made by drug manufacturers.

The success of the healthcare sector has placed pressure on consumers and providers, who have been confronting rapidly rising drug prices in recent years. That has pushed state Medicaid programs to try and cut deals with manufacturers to blunt the cost of furnishing pricey hepatitis C drugs to its enrollees. President Barack Obama has also urged Congress to change the laws that currently bar the Medicare program from negotiating with drug manufacturers to obtain discounts for bulk purchases.

And the success of healthcare securities also places other pressures on the stock market as a whole, particularly if the healthcare sector should hit a rough patch.

"What happens when healthcare stops being such a strong performer or simply hits a valuation or fundamental pothole?" ConvergEx Group analyst Nicholas Colas observed, according to Bloomberg. "The simple answer is that other sectors have to step in with better performance, or the U.S. equity market will stumble."

However, other analysts say there are still many unrealized profits from the ACA and that the healthcare sector should be overweighted relative to other stocks, MarketWatch reported.

To learn more:
- read the MarketWatch article 
- check out the Bloomberg article