This ETF Is Proof That the Healthcare Rebound Is Real

Key Points

• After years of trailing the S&P 500, health care has rebounded, leading all other sectors with a 19% gain over the past six months.
• The bullish case for that rally to continue involves America’s GLP-1 drug obsession and incredibly low health care stock valuations.  
• The Vanguard Health Care ETF provides broad exposure and is off to a strong start in 2026.

With well-publicized losses for companies including UnitedHealth Group NYSE: UNH, Elevance Health NYSE: ELV, and Wegovy and Ozempic maker Novo Nordisk NYSE: NVO, the healthcare sector failed to outperform the broad market last year. 

In the three years prior to that, the sector finished with gains of just 2.6% in 2024 and 2.1% in 2023, and a loss of 2.0% in 2022. 

But healthcare stocks have appeared to turn a corner. Over the past six months, the sector—which enjoys inelastic demand—has led all 11 sectors of the S&P 500 with a nearly 19% gain. 

According to investment professionals, the trend that began in mid-2025 is likely to continue into the new year.

For shareholders of the Vanguard Health Care ETF NYSEARCA: VHT, that is already proving to be true. 

2 Major Catalysts for the Health Care Sector 

There are two major tailwinds that should help health stocks continue to enjoy this bullish momentum. One—the mass adoption of weight loss drugs—was partly responsible for the sector’s bullish reversal halfway through 2025. The other—comparatively low valuations—could continue to attract inflows as investors look to lock in profits and hedge against positions that present more inherent volatility.     

America’s Weight Loss Treatment Craze

Weight loss treatments including GLP-1 agnostics and semaglutide treatments such as Novo Nordisk’s products Ozempic as Wegovy are becoming widely adopted. 

At the same time, pharmaceutical companies are shifting from injectable treatments to pill form, while others, like Pfizer NYSE: PFE, are doubling down on their investments in the weight loss market. 

Speaking on the popularity of these drugs, Catherine Brown, vice president of clinical services at digital health firm Welldo, recently told Reuters that “We're imagining these medications may become so common that everybody's got a GLP-1 app ... right there on your phone next to your bank account." 

Forecasts from industry consultancy firm Grand View Research indicate that the GLP-1 drug market could grow by a compound annual growth rate of 18.54% between 2024 and 2030, resulting in a global market value increase from $13.84 to $48.84 billion.

Low Healthcare Stock Valuations Are Attracting Inflows 

In the wake of President Trump’s tariff announcements in April 2025—trade policies that have had an adverse effect on imported pharmaceuticals—stocks operating in the health care sector have experienced almost comically low valuations, particularly when juxtaposed with the historically high valuations of tech and communication services stocks.  

Pfizer, for example, sports a trailing 12-month (TTM) price-to-earnings (P/E) ratio of 14.7, while Health benefits provider Elevance and Johnson & Johnson NYSE: JNJ have P/E multiples of 15.32 and 19.86, respectively. 

For context, tech favorites such as Palantir NASDAQ: PLTR and Tesla NASDAQ: TSLA have TTM P/E multiples of  421.11 and 290.53, respectively. 

In turn, it was only a matter of time until health care’s ratios caught the eye of value investors looking for opportunities at the tail end of 2025 and heading into 2026. 

In November 2025, Mizuho’s healthcare equity strategist Jared Holz told Barron’s that  “When you see money come out of a space, especially one that’s filled with trillion-dollar [tech] companies, it really doesn’t take much to get some of the underperforming sectors a little juice.”

Vanguard’s VHT: A Basket of Undervalued Stocks

The Vanguard Health Care ETF is up 2.30% this year after gaining more than 18% over the past six months. Much of those gains were fueled by rebounds and strong end-of-year performances from the fund’s top holdings. 

Those positions include the ETF's top five holdings: Eli Lilly NYSE: LLY, AbbVie NYSE: ABBV, Johnson & Johnson, UnitedHealth, and Merck NYSE: MRK.  

Drilling down further into the holdings, VHT also has allocations to Pfizer, CVS Health NYSE: CVS, which acquired health insurance giant Aetna on Nov. 28, 2018, and the United States’ largest hospital chain HCA Healthcare NYSE: HCA.

The ETF carries a negligible expense ratio of 0.09% while paying a dividend that currently yields 1.58%, or $4.64 per share annually. 

What Wall Street Thinks About VHT

Based on analysts’ ratings of 23 companies in the VHT portfolio (64.3% of its total), the fund receives a Moderate Buy rating.

Perhaps the strongest indication of Wall Street’s enthusiasm about the health care sector is the ETF’s current short interest of just 0.33% of the float, or less than 195,000 shares of the 60.17 million shares outstanding. That marks a nearly 37% decrease in short interest since the last reporting period.