Grading the Top Names in a Hot Sector Stealing Momentum From Nvidia
Is money moving from the tech sector to these old-school names?
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Last week, we locked in profits in some large-cap tech names. We didn’t exit large-cap tech entirely, we just lightened up on several names.
It made sense to trim our tech positions for several reasons. First, some of these positions had grown so large, and so quickly, that they needed to be pruned. Otherwise, we'd wind up with an unbalanced, tech-heavy portfolio.
The second reason is because the charts are indicating that real money, at least for now, is being allocated away from large-cap tech and into other sectors.
Pharma on the Rise
Today, we’ll look at one of those sectors, specifically the large-cap pharmaceutical companies.
One way to view this sector is through the SPDR S&P Pharmaceuticals ETF (XPH). This healthcare-focused ETF is outperforming the broader market, gaining 31% over the past six months. Over that stretch, the S&P 500 has gained just over 16%.
Last week, XPH closed at a three-year high (point A). The ETF is trading well above its rising 50-day (blue) and 200-day (red) moving averages.
Which names in the pharmaceutical industry present the best opportunities right now? Let’s go to the charts to find out.
1. Johnson & Johnson (JNJ)
Over the past three years, Johnson & Johnson’s (JNJ) performance has been unimpressive. Shares of the New Jersey-based pharma and medical device provider have been treading water or losing ground:
2022: +3.26%
2023: -11.27%
2024: -7.73%
This stock was quiet for the first half of 2025, and then took flight, gaining about 37% since late June. Last week, J&J closed at an all-time high.
Over the past six months, JNJ has outperformed Nvidia (NVDA) by about 2%. However, over the past month, JNJ shares have gained about 10%, while Nvidia has fallen by over 13%. This is a sign of rotation away from mega-cap tech and into large-cap pharmaceuticals.
GRADE: A
2. Merck & Co. (MRK)
Shares of Merck (MRK) fell by 1.74% in 2023 and 8.75% in 2024. However, 2025 is shaping up to be a positive year for the Rahway, New Jersey-based pharmaceutical company.
Merck has gained 23.45% in the past month, far outpacing the major indexes. The stock’s 50-day (blue) and 200-day (red) MAs recently crossed, a sign of bullish momentum (circled). Last week, Merck shares reached a 52-week high.
GRADE: B+
3. GSK PLC (GSK)
Shares of GSK have gained 39% year-to-date, and about 30% since late July. The London, England-based pharmaceutical company reached a multi-year high in November. GSK boasts a dividend yield of 3.58%.
GRADE: B
Bottom Line
Over the past month, select pharmaceutical stocks have heated up, while tech has cooled. We’re going to attempt to take advantage of this turn of events by rolling some of the proceeds from our recent tech sales into small, initial positions of J&J and Merck.
At the time of publication, Ponsi was long NVDA, JNJ and MRK.
