By Kate Gibson
U.S. stock-market investors are following in the footsteps of
billionaire investor Warren Buffett by rotating into health-care
stocks, with that defensive sector the sole industry group not
losing ground in Monday's sharp equity-market decline.
While the broad market was slammed, shares of large health
insurers rallied as the Obama administration apparently backed off
its plan to give Americans the option of signing up for a
government-run health-insurance option.
"Health care can outperform in a declining stock market, but
what's going on today is that investors have a growing belief that
a public plan will not be part of the final solution," said John
Sullivan, director of research at Leerink Swann, a health-care
investment bank.
"If a public plan is not part of the solution, that's good news
for managed care," he added.
Up 61% year to date, shares of Coventry Health Care Inc. (CVH)
on Monday rose 6%, while shares of Aetna Inc. (AET) gained nearly
5%, while UnitedHealth Group Inc. (UNH) and Cigna Corp. (CI) both
advanced more than 4%.
The rise in insurer stocks came in the wake of Buffett's
Berkshire Hathaway Inc. on Friday reporting it had purchased a
stake in medical-supplies firm Becton, Dickinson & Co. (BDX)
and upped its holdings in drugs and medical-products company
Johnson & Johnson (JNJ) in the second quarter, while reporting
reduced holdings in insurance goliaths WellPoint Inc. (WLP) and
UnitedHealth.
On the Dow Jones Industrial Average (DJI), pharmaceutical giant
Pfizer Inc. was the best-performing stock, up 1.2%. After dropping
nearly 200 points, the Dow industrials recovered some to lately
stand at 9,165.87, off 155.53, or 1.7%. The S&P 500 Index (SPX)
fell 19.97 points, or 2%, to 984.12. The Nasdaq Composite Index
(RIXF) declined 46.73 points, or 2.4%, to 1,938.79.