In short: One leg of his "holy trinity" (healthcare, energy, financials), launched about four years ago. It "has done superbly," and this summer all three are the top sectors at once for the first time. He'd maintain it.
About four years ago he launched a sector portfolio he calls the "holy trinity": healthcare, energy and financials. The idea was diversification, since usually only one of the three works at a time. This summer all three are the market's best sectors simultaneously, a first. He'd keep it. Healthcare is also the one place he says a new AI story (a model finding a cure) could still emerge.
47:36So gold, commodities, crypto. And then at the sector level, I go back to a portfolio we launched about four years ago, which was this holy trinity idea: healthcare, energy, financials. It's done superbly since we launched it, and this summer I'm proud to announce that these are the top three sectors.
In short: "We also, a little bit more from a valuation perspective, are on the more favorable end of the spectrum on healthcare" — the one non-cyclical favorable, rated on price rather than the cycle.
XLV is the healthcare basket — drugmakers, insurers, device and equipment makers, hospital operators. It is the one favorable-rated sector that is not a cyclical bet.
Her reason is price: healthcare has been left behind enough that it now screens well "from a valuation perspective." That is a different kind of argument from industrials/materials/financials, where the case is about the economic cycle — here she is simply saying you are being paid a lot less for the same earnings than in the crowded parts of the market.
43:25We also little bit more from a valuation perspective are on the more favorable end of the spectrum on healthcare and then on the less favorable end of the spectrum would be areas like I already mentioned utilities and real estate. So, but we think applying that factor overlay because even within sectors, you're seeing much more dispersion and the key to figuring out what's going to be on the better end of that dispersion of performance, what's going to be on the worse end.
In short: "Underneath the hood there are very very encouraging things happening in healthcare right now… healthcare as a sector has broken out above almost a three-year downtrend relative to the S&P." Pressured for years by drug pricing and the ACA-subsidy rollback, "but now we're starting to rebound and it's been sort of broad-based, biotechnology, pharmaceutical stocks, HMOs."
Healthcare has spent nearly three years losing ground to the rest of the market — hurt by political pressure on drug prices and by the rollback of Affordable Care Act subsidies, which squeezed insurers and providers. Newton's signal is not that the sector has bottomed in absolute terms; it is that it has stopped underperforming. He watches the ratio of healthcare to the S&P 500, and that ratio has "broken out above almost a three-year downtrend."
Why the relative measure matters: a sector can rise in a rising market and still be a bad place to have your money. When the ratio turns, it means new money is actually rotating in, which is what sustains a move rather than a one-week bounce.
The confirming detail is breadth within the sector — the strength runs across biotechnology (drug discovery companies), pharmaceuticals (the large established drugmakers) and HMOs (health insurers). Three very different business models moving together points to money flowing into the sector as a whole, not to one company's good news.
10:50where it's been led by a handful of stocks and we used to have our Exxons and the DuPonts and the Generals, General Motors, General Electric, and now it's obviously more with the hyperscalers and AI that comprise this bucket. So, definitely important to keep on top of the stocks that are driving it, but honestly underneath the hood there are very very encouraging things happening in healthcare right now and healthcare as a sector has broken out above almost a three-year
In short: The instrument for Larry's healthcare call (host Patrick's trade-of-the-week construction): long XLV ~$152.85 with an Aug 145/165 collar — Larry sees the momentum→healthcare turn as "a big winner the second half of the year."
XLV is the S&P 500 healthcare-sector ETF. Larry's argument: healthcare has shrunk from 16% to 8% of the S&P even as the boomer population ages, because managers sold it to fund tech buys and momentum quants shorted it. He expects a "huge turn" out of semiconductors into healthcare around quarter-end — "a big winner the second half of the year."
Host Patrick Ceresna turned that call into the show's trade of the week: own XLV (~$153) and put a "collar" around it — buy an August $145 put (the right to sell at 145, capping your loss) and pay for it by selling an August $165 call (giving away gains above 165). Defined risk of about $8.50 a share against about $11.50 of upside while the rotation plays out.
53:56From a trade construction standpoint, I want to express the view through the XLV, the healthcare sector ETF. With XLB closing around $152.85, the primary position is simply to own the shares and participate in what appears to be an emerging rotation back into healthcare. Now, because broader equity market volatility remains a risk, I want to overlay a lowcost option collar structure to define the near-term downside while still leaving room for upside participation.
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