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Deep Dive: Health-care fund managers say a spike in drugs and devices will produce big returns

After last year’s underperformance, this seems to be a great time to invest in health-care stocks.

The sector’s valuation is attractive, and the pace of drug approvals has increased. And even if the Republican-controlled Congress manages to “repeal and replace” the Affordable Care Act of 2010 (known as “Obamacare”), the new legislation will continue funneling money into health insurance. That means the gravy train will keep running.

This chart shows how the forward price-to-earnings ratio has declined for the S&P 500 SPX, +0.09% health-care sector, as valuations have risen for the technology sector and the entire index, over the past two years:

FactSet

In the 2016 presidential campaign, both major candidates were bashing biotech and pharmaceutical companies over drug prices, which held back the health-care sector.

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