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.