Despite a scare generated by the rollout of the Obama healthcare plan, the medical device sector continues to outperform the broader market.

IHI

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Since the beginning of the year, The Dow Jones U.S. Medical Devices Index Fund (IHI) is down only 5% comparing favorably to the S&P 500 (SPY) which was down 12% year-to-date as of Friday.

Medical device companies have been on a roll.  According to the Wall Street Journal’s article Medical Device Makers Face Health-Care Reform Pressures , medical device companies enjoy profit margins in the 70% range by selling drug-coated stents for around $2,000 each, while replacement hips fetch about $6,600.  Shorting the S&P 500 and going long on IHI over the past two years would have returned 11%.

Medical device stocks came under pressure early in the Clinton administration which floated health proposals similar to what Obama has proposed, but device makers later bounced back. Industry officials believe that medical devices have the least exposure in the health care sector to the proposals currently on the table.

IHI’s largest holdings include MedtronicCovidienThermo Fisher Scientific and St. Jude Medical.  The fund’s expense ratio is 0.48% and currently yields 0.11%.

For more, see the ETF Directory for a complete listing of Industry ETFs.