Despite their recent and considerable underperformance, market analysts stress the need for clients to evaluate health care equities by their long-term returns. "The underlying story behind health care is strong," Morningstar analyst Robert Goldsborough says. "Despite health care reform, there is a lot arguing broadly for health care." Although they all posted negative returns in the past year, the sector's five leading ETFs beat the three-, five- and 10-year performance numbers of the S&P 500, according to Morningstar. The broad-based index posted annualized gains of 11.95% over three years, 11.73% over five years and 7.10% over 10 years. The one-year return amounted to a gain of 0.76%. The sector's top ETF performer during the past five years, PowerShares Dynamic Pharmaceuticals (PJP), illustrates the long-term growth trend for health care equities. Although the fund posted a one-year loss of 14.74% through April 25, it also enjoyed a five-year return of 22.98%. The sector's largest ETF, the $12.76 billion Health Care Select Sector SPDR (XLV), incurred a one-year loss of 2.28% but returned nearly 10.73% return over the past 10 years. For this list, we considered all health sector ETFs and ranked them by their five-year annualized returns. All data from Morningstar. This story is part of a 30-30 series on smart ETF strategies. A version of this story was originally published on March 15. 2

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