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Endo Pharmaceutical’s Implosion Shows Futility of Sector-Picking

Investors get an earful of conventional wisdom about so-called hot industries and sectors. For example, plenty of people believe the healthcare sector is a sure bet, with aging baby boomers purchasing goods and services in record numbers. Endo Pharmaceutical blew up those “hot sector” assumptions Friday, and not in a good way.

Investors get an earful of conventional wisdom about so-called hot industries and sectors.

For example, plenty of people believe the healthcare sector is a sure bet, with aging baby boomers purchasing goods and services in record numbers.

And of course, there’s the inherent assumption that a company included in the S&P 500 must – by definition – be a safe investment.

These may be good stories, but they’re not necessarily true.

Endo Pharmaceutical blew up those “hot sector” assumptions Friday, and not in a good way.

Shares of the S&P 500 component gapped down and plummeted 39% in six times normal trading volume after the company slashed its 2016 sales and earnings estimates. The company also reported a worse-than-expected loss in the first quarter.

So much for healthcare being that nice, safe, predictable investment, driven by boomers’ spending.
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