Investors expect the pharmaceutical, defense, technology, and biotech sectors to provide the most attractive investment opportunities in the next six months, according to the February UBS/Gallup Index of Investor Optimism survey*. The February survey asked investors to rate the investment opportunities in 12 sectors based on their investment potential in the next six months. Those 12 industry groups include transportation, retail, Internet, financials, utilities, healthcare, energy, biotech, technology, defense, telecommunications, and pharmaceuticals.
Gallup calculates net sector ratings by taking the percentage of investors who rate a given industry sector's investment opportunities as excellent or very good, and subtracting the percentage of investors who rate that sector's opportunities as poor or very poor. Using this measure, investors give the pharmaceutical sector the highest net rating, 69%. The defense, technology, and biotech sectors are next in line with net investor ratings of 57%, 56%, and 54%, respectively. The only sector in which investor sentiment is more negative than positive is transportation, with a net 1% of investors describing the sector as poor or very poor with respect to its investment potential over the next six months.
A look at the August 2003 and February 2004 results offers an interesting comparison of the attractiveness of various sectors. In comparing the two surveys, technology, financial, energy, healthcare, telecommunications, and retail sectors have all shown double-digit increases in net investor ratings.
Interestingly, the rank order of net sector ratings has not changed since the question was last asked in August 2003, with two exceptions: The telecommunications industry overtook utilities in the 2004 net ratings, and the technology sector inched ahead of biotech.
In fact, comparing the findings of the February 2004 survey with those from last August reveals that the sector experiencing the largest turnaround in investor opinion was technology. The tech sector received net positive ratings from 41% of investors in August 2003, and that number has since increased by 15 percentage points to 56%.
Bottom Line
It is somewhat sobering that, looking ahead, investors feel that two of the best investment opportunities are in the pharmaceutical and defense sectors. The investment potential in these areas seem to point to two underlying realities looming large before us: the future prescription drug needs of the aging baby boomers, and the ever-increasing geopolitical uncertainties that may call for military action.
*Results for the total dataset are based on telephone interviews with 863 investors, aged 18 and older, conducted Feb. 1-15, 2004. For results based on the total sample of investors, one can say with 95% confidence that the margin of sampling error is ±4 percentage points.
