Healthcare investors can expect a volatile week starting on Monday when the sector's biggest financial event hits San Francisco. The annual J. P Morgan healthcare conference, in which many healthcare companies present product and financial news to would-be investors, has been credited for helping the January outperformance of the healthcare sector in recent years.
But after a strong five-year period saw the sector grow to 15.2 percent of the S&P 500 index from 10.9 percent in 2010, investors are concerned that political threats to drug pricing and uncertainty about Obamacare could hurt the sector.
"There are probably 15 to 20 high profile companies that will give some formal guidance" at the conference, said David Heupel, a healthcare analyst at Thrivent Investment Management in Minneapolis. "You see either the group is in pretty good shape or maybe 2016 is going to be a little less robust than expectations."
The S&P healthcare sector is still reasonably priced relative to the broader market, with the index's price roughly 16.1 times earnings expected over the next 12 months, compared to the 16.5 level for the S&P 500 index. And even at 15.2 percent of the S&P, healthcare stocks still make up less than the 17.4 percent that healthcare spending contributed to US gross domestic product in 2013, the most recently aggregated data from the Bureau of Economic Analysis.
Listening for answers at the conference will be roughly 3,000 investors like Les Funtleyder, healthcare portfolio manager for E Squared Asset Management in New York.
"For the first part of the year, (the conference is) actually very important," said Funtleyder. "It sets the tone."
J. P Morgan says it expects roughly 9,000 attendees and presentations from more than 400 biotech, pharmaceutical, medical device, health insurance and other healthcare companies, a similar amount to last year.
As individual companies take the podium at the conference, their shares could gyrate significantly.
For example, Celgene Corp, whose stock soared 17 percent during the week of the conference in 2013 after it issued a long-term outlook, is among companies expected to give key financial data this year, along with rival large-cap biotech firms Regeneron Pharmaceuticals and Vertex Pharmaceuticals.
The climate for deals - including those already struck and the outlook for more consolidation - will also be in focus.
Top executives at insurers Anthem and Aetna , both of which are trying to gain clearance for massive acquisitions, could give investors more confidence those deals will pass anti-trust scrutiny.