Healthcare has become a safe haven for investors: the sector grew by 10% in November

The health care sector was the strongest performer in the U.S. market in November, with the S&P 500 Health Care Index up 10%, while the S&P 500 declined more than 1%. Against the backdrop of volatility, investors are moving away from overvalued AI stocks into defensive assets. Hedge funds have reinforced this trend: according to Goldman Sachs, the inflow of funds into the sector has become the highest in five years.

In November, an obvious leader appeared on the U.S. stock market - the health care sector, Bloomberg notes . Investors are reconsidering their bets on AI companies, and against this background, the S&P 500 Health Care index rose 10% from the beginning of the month as of November 25, showing the best result of all 11 sectors of the benchmark. The S&P 500 itself has declined 1.1% over the same time, the agency calculated.

The growth of interest in healthcare is taking place against the background of increased volatility in the market: sharp intraday fluctuations have become the norm in November, Bloomberg writes. Shares of AI leaders, such as Oracle and Nvidia, came under pressure - investors doubt that future earnings will be able to justify the current high valuations of securities. The consumer sector also sagged amid worries about a slowing labor market and persistent inflation.

"Investors are looking for undervalued ideas amid overvaluation in a number of sectors and growing concerns about a possible bubble around AI," explains Sarah Hunt, chief market strategist at Alpine Woods Capital Investors.

Hedge funds have become one of the key drivers of the sector's growth: data from Goldman Sachs prime brokerage shows that investors have been most active in buying healthcare stocks for four weeks in a row. Inflows in the week of Nov. 17-23 were the highest in more than five years. Mutual funds also increased their investments - their share in the sector has already exceeded its weight in the S&P 500.

In a separate report, Goldman Sachs noted that funds entered the fourth quarter with the largest outperformance of the health care sector in a decade - barring brief spikes in early 2020 and early 2023. In the third quarter, managers increased exposure to it by another 260 basis points, while reducing investments in the consumer staples and non-essential services sector by nearly as much.

The strong momentum is supported by data from research firm PivotalPath: its hedge fund index in the healthcare segment rose 13% in the three months to September - driven by successful clinical trials, accelerating adoption of AI in drug research and development, and a resurgence of deals in biotech and pharmaceuticals."Fund managers now like a combination of factors: a wide variance in company dynamics within the sector, an active M&A agenda and a favorable regulatory environment," said PivotalPath CEO Jonathan Caplis.

Individual companies in the healthcare sector are showing even more impressive performance.

- Shares of pharma giant Eli Lilly have jumped 29% since the beginning of the month, bringing its capitalization last week to more than $1 trillion for the first time - something no other pharma company has ever seen. The growth was mainly driven by the rapid expansion of the market for weight-loss drugs.

- Merck shares rose 23% as investors became more optimistic about the company's prospects following the launch of its key oncology drug Keytruda, as well as recent acquisitions and successful clinical data.

- Regeneron's stock price rose 21% after regulators approved the higher-dose retinal disease drug.

- Shares of biotech giant Amgen added 14% after it released a quarterly report that beat analysts' forecasts.

- Goldman included Alnylam Pharmaceuticals on its list of "rising stars," while Abivax, Natera and Cidara Therapeutics were among the VIP stocks - those favored by hedge funds most often.

Despite the strong growth in quotations, the sector remains relatively inexpensive: it trades at a multiple of 18.7 - with the broad market ratio at 22.1, Bloomberg notes.

This article was AI-translated and verified by a human editor