Yahoo Finance·2025-11-19 13:24Sector Overview - The AI sector is experiencing profit-taking, with most tech stocks trading below their 20-day moving averages, while healthcare is seeing significant inflows not seen since early 2021, indicating a shift towards stability and defensive plays [1][6] - Healthcare stocks have had their largest quarterly inflows since Q1 2021, as investors move away from volatile tech stocks [6] Valuation and Earnings - Healthcare is currently undervalued, trading at 16 times forward earnings compared to tech stocks, which are over 30 times forward earnings, highlighting a potential investment opportunity [2] - The healthcare sector demonstrated defensive strength during the Q1 2025 bear market, reinforcing its appeal to investors seeking stability [2] Key Drivers in Healthcare - GLP-1 drugs have revolutionized weight loss programs and created a significant revenue source, with recent agreements to provide access to Medicare and Medicaid patients at reduced prices [3] - Eli Lilly's stock has recently rallied due to strong Q3 earnings and improved Medicare access to its drugs, reasserting its leadership in the healthcare sector [8] - Merck's stock is considered undervalued at 10 times forward earnings, with a diverse pipeline and strong sales growth in its lead oncology drug, Keytruda [9][10] - AbbVie has seen significant sales growth from its drugs, including SKYRIZI and RINVOQ, and is well-positioned with a reasonable valuation of 19 times forward earnings [11][13] Performance Comparison - Healthcare stocks have gained 34% over the past five years, but this lags behind the explosive growth of AI and tech stocks, which have significantly outperformed the healthcare sector [4] - The recent rotation towards healthcare suggests a potential shift in investor sentiment as tech stocks face volatility and profit-taking [5][6]