One of its main features is that it moves forward fast as new technologies are being constantly developed. That’s the beauty of this sector – it’s not as related to the economic cycle. No matter if the economy is doing well or no, no matter if people lost a job or have excess money, they will always buy drugs when they fall sick. This means that people will buy this stuff no matter what. Price inelastic demand: What I like about the Healthcare sector is that demand for those products is inelastic. It’s generally safer to invest in bigger companies, that have more products and projects going on rather than in a small company that relies on one patent. Then the patent expires and the edge the company had is over. However, patents only last so long, so a company might benefit from a special drug they invented only for a limited time. Patents: Biotechnology companies and companies that develop new drugs rely on patents and laws to protect their intellectual property. Leading companies: Johnson & Johnson, UnitedHealth, Pfizer, … Healthcare: Sector Specifics I think there will be even more emphasis on new drug development, vaccines, prevention, … All that will be helping the Healthcare companies thrive. I think that after the Covid-19 pandemic the overall trend in strong and growing Healthcare sector will continue and become even stronger. Especially the tobacco companies, which have an average dividend of astonishing 6%! Stable & solid dividend: Because those companies don’t rely on the business cycle too much, they are able to pay stable dividends even in bad times. For this reason, the Consumer Defensive sector performs quite well even during recessions. Not dependent on the economic cycle: Companies in this sector provide essentials that people buy no matter what. Leading companies are: Walmart, Procter & Gamble, Coca Cola, … Consumer Defensive: Sector Specifics Those are the reasons why I like investing in this sector.Īn interesting fact is that this sector is the 2 nd best performing sector in the long run (since 1962 until 2021). Stocks in this sector are not too volatile, they pay regular dividends and have quite consistent growth which is not dependent on the economic cycle. Typical examples are companies that deal in: basic foods, beverages, household goods, hygiene products, alcohol, tobacco, … In this article, I will list a couple of picked sectors and their most important specifics. To be able to make a good decision about which sector to invest in and which to avoid, you need to know the specifics of each sector. There are sectors I like – for example Basic Materials, Consumer Defensive, Healthcare, … as there are also sectors I avoid investing in – Financial, Technology,… What I recommend is thinking very hard about your choice in which sector you are going to invest in. Stocks fall into 11 sectors and each has its specifics. In my opinion, choosing the right sector/sectors to invest in is equally important as picking the right stocks.
The sector into which a company belongs hugely impacts how companies in that sector perform. What do I mean by the “broader context”? By this, I mean the “ SECTOR” to which a given company belongs. They jump right into picking stocks without thinking about the broader context. Before investing, please read the prospectus, which may be located on the SEC's EDGAR system, to understand the terms, conditions, and specific features of the security.Many beginner investors make one very serious mistake. (As interest rates rise, preferred securities prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Preferred securities also have credit and default risks for both issuers and counterparties, liquidity risk, and, if callable, call risk. Dividend or interest payments on preferred securities may be variable, be suspended or deferred by the issuer at any time, and missed or deferred payments may not be paid at a future date. If payments are suspended or deferred by the issuer, the deferred income may still be taxable. See your tax advisor for more details. Most preferred securities have call features that allow the issuer to redeem the securities at its discretion on specified dates, as well as upon the occurrence of certain events. Other early redemption provisions may exist, which could affect yield. Certain preferred securities are convertible into common stock of the issuer therefore, their market prices can be sensitive to changes in the value of the issuer's common stock. Some preferred securities are perpetual, meaning they have no stated maturity date. In the case of preferred securities with a stated maturity date, the issuer may, under certain circumstances, extend this date at its discretion. Extension of maturity date will delay final repayment on the securities. Preferred securities are subject to interest rate risk.
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