With tech and AI stocks dominating the S&P 500, a veteran manager is moving fresh capital into healthcare and robotics ETFs, aiming for long-term growth as sector leadership shows signs of rotation
The S&P 500's strong performance in 2026 has been powered by a handful of large technology and artificial intelligence stocks, but some professional investors are starting to look for opportunities beyond the sector's recent winners. Chris Versace, who manages TheStreet Pro Portfolio, recently initiated new positions in two exchange-traded funds (ETFs) that target healthcare and robotics, signaling a shift in strategy as market leadership evolves.
On August 5, Versace's portfolio added the Health Care Select Sector SPDR ETF (XLV) and the Robo Global Robotics and Automation Index ETF (ROBO). The initial allocation was 395 shares of XLV at around $164 per share, representing about 1% of the portfolio, and 575 shares of ROBO at approximately $84.50, or 0.75% of assets. Both positions received an initial "Two" rating, reflecting a cautious approach after the market's recent rally. Versace plans to build these stakes gradually, adding more shares on pullbacks rather than buying all at once-a method he previously used with the First Trust Nasdaq Cybersecurity ETF (CIBR).
For XLV, the initial price target is $180, with a checkpoint at $144. For ROBO, the target is $95, with a checkpoint at $70. If either ETF falls to its checkpoint, the position will be reviewed, but not automatically sold. This approach is designed to manage risk while allowing for further investment if the underlying thesis remains intact.
Healthcare ETF: Seeking Defensive Growth
XLV tracks the Health Care Select Sector Index, offering exposure to U.S. companies in pharmaceuticals, biotechnology, medical devices, healthcare providers, and life sciences. The fund holds more than $41 billion in assets and includes 63 companies, with the top 10 accounting for about 62% of the portfolio. Major holdings include Eli Lilly, Johnson & Johnson, AbbVie, Merck, and Amgen. According to State Street, the fund's issuer, healthcare was upgraded from neutral to positive in its Q3 2026 outlook, after nearly a year of caution.
Versace's decision to use an ETF rather than individual stocks is intended to diversify risk across the sector, avoiding the volatility that can come from company-specific events such as drug approvals or regulatory setbacks. He has not ruled out adding individual healthcare stocks in the future, but for now, the ETF provides broad exposure. The long-term case for healthcare is supported by demographic trends: as the U.S. population ages, demand for healthcare services is expected to rise. The sector has also lagged large-cap technology stocks over the past two years, making current valuations more attractive for some investors.
Robotics and Automation: Expanding the Growth Thesis
ROBO invests in companies involved in robotics, automation, artificial intelligence applications, and supporting industrial technologies. The ETF has delivered an annualized return of 8.64% since its launch in January 2014, according to ROBO Global. Versace sees the robotics market as increasingly important, with automation investment accelerating across industries such as logistics, healthcare, manufacturing, defense, and agriculture. Many of these sectors are facing labor shortages and cost pressures, making automation a strategic priority.
Recent U.S. tax policy changes, such as expanded depreciation provisions, have made it more attractive for companies to invest in automation equipment. ROBO's holdings also align with themes already present in Versace's portfolio, such as increased demand for computing and networking driven by autonomous vehicles and industrial automation. However, the robotics sector is more sensitive to valuation swings and capital spending cycles than healthcare, which is why the initial position is smaller.
For investors tracking sector rotation, it's worth noting that a shift out of mega-cap tech stocks and into healthcare or industrial names could provide a tailwind for both XLV and ROBO. Lower interest rates would also benefit growth-oriented funds like ROBO, as cheaper borrowing costs tend to support higher valuations for companies investing in future expansion.
Managing Risk and Monitoring Triggers
Versace intends to revisit price targets as Wall Street analysts update their forecasts for major holdings during earnings season. Strong results from companies like Eli Lilly or AbbVie could justify raising XLV's target, while improved capital spending data or clearer automation policy could do the same for ROBO. If either ETF approaches its checkpoint level, the portfolio will reassess whether the original investment thesis still holds. If so, a lower price could be an opportunity to add shares; if not, the position may be reduced or exited.
These are not short-term trades. The plan is to hold both ETFs over a longer time horizon, building exposure as market conditions evolve. With less than 2% of the portfolio allocated to these new positions, there is flexibility to adjust as new information emerges.
Sector-focused ETFs like XLV and ROBO have become increasingly popular among investors seeking targeted exposure without the risk of betting on a single company. According to Morningstar, U.S. sector ETF assets surpassed $1.2 trillion in 2025, with healthcare and technology among the largest categories. Expense ratios for broad sector ETFs typically range from 0.10% to 0.50%, while more specialized funds like ROBO may charge higher fees, reflecting the complexity of their underlying indexes.
As investors weigh the risks and opportunities of sector rotation, it's worth considering how shifts in market leadership can affect portfolio performance. For example, recent warnings about hidden costs in enterprise AI adoption have prompted some managers to diversify beyond the most crowded trades in technology.
Sector ETFs offer a way to participate in broad industry trends while managing company-specific risk. But they are not immune to volatility, and their performance can diverge sharply depending on macroeconomic conditions, policy changes, and investor sentiment. As always, suitability depends on an investor's goals, risk tolerance, and time horizon.
Healthcare and robotics represent two distinct but potentially complementary themes for long-term investors. While healthcare offers defensive characteristics and demographic tailwinds, robotics and automation provide exposure to innovation and productivity gains across the economy. Both sectors face unique risks, including regulatory changes, capital spending cycles, and valuation pressures, underscoring the importance of ongoing monitoring and disciplined position sizing.
