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Healthcare Stocks Struggle To Recover Despite Strong Q2 Results

From looking at the charts of major healthcare stocks, you would think that their last earnings reports were just dreadful, but as it turns out, they were one of the best-performing sectors fundamentally. So why are investors are so bearish on healthcare stocks? Analysts have a few ideas and see a buying opportunity based on the recent weakness.

S&P 500 gets killed in August

Last month was an atrocious one for the S&P 500 Index as a whole, as all of its sectors were burned. Overall, the index fell 6.3%, with healthcare stocks taking an 8.1% hit during the month, the largest of all the sectors in the S&P 500. It was a major diversion from the traditional investing view that price will lead fundamentals, notes S&P Capital IQ Senior Analyst Lindsey Bell. She doesn't believe the recent pullback in healthcare stocks is justified.

The Healthcare sector as a whole performed magnificently during the second quarter, unlike its Energy and Materials counterparts. In fact, Healthcare posted a growth rate of 14.7%, which significantly outperformed that of all the other sectors.

The market bottomed out on Aug. 25 with a 10.3% correction, according to Bell. Since then, healthcare stocks have recovered some of the value they lost last month, but they still have a long way to go as they've only recovered halfway, leaving potential opportunities for value investors.

Healthcare sector the fourth worst-performing

Bell analyzed the price performances for the...