Over the past 5 years, the S&P 500 Health Care sector has frustrated investors with inconsistent relative performance versus the S&P 500, challenging its reputation as a reliable, defensive sector. In August 2025, Health Care stocks registered their worst 5-year return relative to the S&P 500 in over thirty years.
However, recent price action suggests a potential change among Health Care stocks. Over the past three months, Health Care registered a 16.4% price return, decisively outperforming all S&P 500 sectors, as well as the broader index. It’s important to note, past performance does not guarantee future results.
Past performance does not guarantee future results.
Currently, the data suggests that this change in tune is not being powered by a select few. On both a market cap weighted and equally weighted basis, Health Care is turning higher relative to the S&P 500. This means that there appears to be broad participation powering this move in Health Care stocks.
Skeptics of the sector (perhaps fairly) can argue this recent perk up is little more than mean reversion from a historically bad stretch. That said, there appears to be fundamental justification.
At the beginning of the 3Q, S&P 500 Health Care sector was expected to grow earnings 0.1% year-over-year and revenue 4.5% year-over-year. Fast forward to today with 95% of the sector having reported, earnings are now expected to grow 5.1% Y/Y, with revenue slated to grow about 6.6%.
Growth expectations have vastly improved from the start of earnings season with 93% beating earnings estimates and 84% beating revenue estimates, reflecting a surprise factor of 12.5% and 2.3% respectively.
Alongside a better-than-expected earnings season, Health Care relative valuations are also attractive, with the sector trading at a next twelve-month (NTM) price/earnings (P/E) ratio of 17.5x vs. the S&P 500’s 22.9x.
The case for health care stocks is improving, but the sector’s true standout remains GLP-1 and weight-loss drug innovation. With focused exposure to companies addressing obesity through breakthrough drug development, the Roundhill GLP-1 & Weight Loss ETF (OZEM) has significantly outperformed both the S&P Health Care sector and the broader S&P 500 in 2025. Year-to-date, OZEM is up 29.58%, versus 10.84% for Health Care and 14.55% for the S&P 500.
Global obesity rates have nearly tripled since 1975 and are projected to affect more than half the world’s population by 2035, driving an urgent need for effective treatments. Goldman Sachs forecasts that the obesity-treatment market could reach $130 billion by 2030, underscoring the scale of the opportunity ahead. That backdrop is already fueling intense competition among major pharmaceutical players, highlighted most recently by the bidding war for Metsera, clear evidence of how aggressively the industry is positioning for leadership in GLP-1 innovation.
Through its actively managed approach, the Roundhill GLP-1 & Weight Loss ETF (OZEM) seeks to provide exposure to weight loss stocks that are at the forefront of one of the most revolutionary advancements in the global pharmaceuticals industry.
Learn more about OZEM: https://www.roundhillinvestments.com/etf/ozem/
The S&P 500® Health Care Index comprises those companies included in the S&P 500 that are classified as members of the GICS® health care sector.
The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization.
The price-to-earnings (P/E) ratio measures a company's share price relative to its earnings per share (EPS). Often called the price or earnings multiple, the P/E ratio helps assess the relative value of a company's stock. It's handy for comparing a company's valuation against its historical performance, against other firms within its industry, or the overall market.
Investors should consider the investment objectives, risk, charges and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about Roundhill ETFs please call 1-855-561-5728 or visit the website at www.roundhillinvestments.com/etf/OZEM. Read the prospectus or summary prospectus carefully before investing.
Health Care Companies Risk. Health care companies, such as companies providing medical and healthcare goods and services, companies engaged in manufacturing medical equipment, supplies and pharmaceuticals, as well as operating health care facilities and the provision of managed health care, may be affected by government regulations and government health care programs, increases or decreases in the cost of medical products and services and product liability claims, among other factors. Many health care companies are heavily dependent on patent protection, and the expiration of a company’s patent may adversely affect that company’s profitability. Health care companies are also subject to competitive forces that may result in price discounting, may be thinly capitalized and susceptible to product obsolescence.
Pharmaceutical Companies Risk. The Fund may have significant exposure to pharmaceutical companies in connection with its investments in GLP-1 & Weight Loss Companies. Pharmaceuticals companies may be affected by industry competition, dependency on a limited number of products, obsolescence of products, government approvals and regulations, loss or impairment of intellectual property rights and litigation regarding product liability. Pharmaceutical are subject to competitive forces that may make it difficult to raise prices of their products and may result in price discounting. The profitability of some pharmaceuticals companies may be dependent on a relatively limited number of products. The research and development costs required to bring a new product to market are substantial with no guarantee that the product will ever become profitable. Many new products are subject to gaining the approval of the U.S. Food and Drug Administration (“FDA”), which can be long and costly. Many pharmaceutical companies are heavily dependent on patents and intellectual property rights. The loss or impairment of these rights may adversely affect the profitability of these companies. Pharmaceuticals companies may also be subject to extensive litigation based on product liability and similar claims.
Biotechnology Companies Risk. The Fund may have significant exposure to biotechnology companies in connection with its investments in GLP-1 & Weight Loss Companies. Biotechnology companies invest heavily in research and development which may not necessarily lead to commercially successful products. Biotechnology companies are subject to increased governmental regulation which may delay or inhibit the release of new products. The effects of high development costs and increased regulation may be exacerbated by a company’s inability to raise prices to cover costs because of managed care pressure or price controls. Many biotechnology companies are dependent upon their ability to use and enforce intellectual property rights and patents. Any impairment of such rights may have adverse financial consequences. Biotechnology stocks, especially those issued by smaller, less-seasoned companies, tend to be more volatile than the overall market. Biotechnology companies can also be significantly affected by technological change and obsolescence, product liability lawsuits and consequential high insurance costs.
Concentration Risk. The Fund is concentrated in the industry or group of industries comprising the health care sector. The Fund may be susceptible to an increased risk of loss, including losses due to adverse events that affect the Fund’s investments more than the market as a whole, to the extent that the Fund’s investments are concentrated in the securities and/or other assets of a particular issuer or issuers, country, group of countries, region, market, industry, group of industries, sector, market segment or asset class.
New Fund Risk. The Fund is a recently organized investment company with a limited operating history. As a result, prospective investors have a limited track record or history on which to base their investment decision.
Roundhill Financial Inc. serves as the investment advisor. The Funds are distributed by Foreside Fund Services, LLC which is not affiliated with Roundhill Financial Inc., U.S. Bank, or any of their affiliates.