Powerful Inflows into Small-Cap Health Care Stocks
When you follow money flows, you don’t need headlines to generate alpha.
The supply and demand picture reveals the outliers.
Today we’ll cover the powerful inflows into small-cap health care stocks.
Let’s take a step back. In early December, we made the call that 2025 is shaping up to be a stock pickers market. Thus far I’d say it’s true.
We’ve seen lots of rotational action and prior market pain points are beginning to show leadership.
Health Care stocks in particular suffered in 2024 as a new Presidential administration sparked fears over potential regulatory changes. The S&P 500 Health Care sector gained a measly 2.58% last year, vastly underperforming the S&P 500’s 25% performance.
Thus far in 2025, Health Care names have been top of the sector leaderboard…with a few discrete small-cap names receiving powerful institutional sponsorship.
Today we’ll take a glance at the new market reshuffle. Then we’ll zero in on the Health Care sector. Finally, there are 3 under-the-radar small-cap names leading the charge.
Stocks Rally with New Sector Leadership
Year-to-date, the S&P 500 has gained 3%. On the surface, it appears that the strong momentum from 2024 is carrying over into 2025.
But when you peel back the equity onion, you understand that new leadership is driving the upward march.
The below S&P 500 sector YTD snapshot reveals this beautifully.
Information Technology and Discretionary groups are negative YTD with -.57% and -.39% returns respectively.
Prior left-for-dead groups like Staples and Health Care are booming with jolts of 5.47% and 5.86% gains respectively.
This reshuffling highlights how quickly narratives shift. And money flows help us identify these trigger points.
Was MAPsignals aware of the potential buy signal for lowly Health Care stocks? Absolutely. And you can review an extremely non-consensus call from 3-months ago where we said this oversold health care signal is undefeated.
That call is proving undefeated as the return since that capitulation event has the SPDR Health Care Select Sector ETF (XLV) up 3.3%.
Back on November 15th, 70 discrete pharma, drug, and instruments stocks saw outflows…extreme to say the least.
Below is an updated buys and sells chart for the health care group. I’ve highlighted how outflows are typically great reversion signals:
Keep in mind, the MAPsignals process doesn’t just look at large-caps…we’re tracking flows for all sizes…including small-caps.
Powerful Inflows into Small-Cap Health Care Stocks
Want to guess the best performing small-cap sector in 2025? It’s health care by a longshot.
Below snapshots the YTD S&P Small Cap 600 sector returns. Health care is up 4.7%, proving to be the far and away leader:
If a sector is up this much, specific stocks inside the group are booming.
This is where having a market map comes in handy.
Turns out 3 specific names are under massive accumulation and have made our Top 20 report numerous times.