Healthcare Is Now a Value Sector as Pharma Stocks Underperform Tech
Quick Read
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Merck’s Keytruda posted $8 billion in Q1 sales, while Summit’s ivonescimab faces binary risk ahead of its November 14 FDA decision.
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The Nasdaq-100 surged 64% over two years while XLV dropped 7% in 2026, turning healthcare from a defensive holding into a value play.
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After years of lagging the market, healthcare may be taking on a new role in investor portfolios.
Speaking on CNBC, Mizuho healthcare strategist Jared Holz reframed the sector, arguing that years of underperformance have turned drug stocks from a defensive holding into something more interesting for growth-heavy portfolios. “I think you just have to look at health care as almost like a value sector,” Holz said, pointing to drug pricing pressure and managed care headwinds that have dragged on large-cap pharma while tech ripped higher.
The performance gap is hard to argue with. The Nasdaq-100 is up 63.91% over the past two years, while Merck stock has slipped 4.32% over the same window.
The Case for Healthcare as Value
Many investors have spent the past several years concentrating heavily in technology, particularly AI-related stocks. As those positions have grown, healthcare has increasingly become the place where valuations appear more reasonable, and expectations have fallen.
“If you’re very, very full to the gills with growth and you want to take a little bit off and you’re trying to find some names that have underperformed, that’s really what it’s come down to,” Holz said.
He stopped short of predicting a major healthcare rally: “It’s sort of like it’s cheap. I’m not sure what it’s going to do. But if you want to take a small position as an offset, I guess.”
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Holz is suggesting healthcare may serve as a counterbalance for investors whose portfolios have become heavily tilted toward growth and AI-related names.
Merck Could Be Interesting for Its Keytruda Franchise
For investors looking at large-cap pharmaceuticals, Holz pointed to Merck (NYSE:MRK) as one of the clearest examples of a value opportunity. The stock trades at a forward P/E of 23 and carries a 2.74% dividend yield, while Wall Street’s average analyst price target of $129.74 sits above the current $115.17 price.
The bigger story, however, remains Merck’s flagship immunotherapy drug, Keytruda. “The thing that is sort of most resonating, maybe, is just the power of Merck’s Keytruda and the fact that there are so many companies that are using Keytruda as the backbone for their therapy. No one can seem to get the results that they want in monotherapy,” Holz said at ASCO. That dynamic forces would-be challengers into partnership rather than head-on competition.
