Health Care is by far the cheapest sector in the S&P 500, with the pharmaceutical stocks being the cheapest subgroup. This makes little sense to me as the economic environment is still uncertain and the aging baby boomers will require more medical care.
The reason most bears will cite for the underperformance is health care reform. However, health care reform is reform only in name. It is a giant spending bill. It will cost the government nearly one trillion dollars. An article in the New York Times this weekend said it will raise costs for small businesses. If everybody will be spending more money on health care, how will this be bad for health care companies?