There's a new area of the stock market that's quietly crushing it - here are some simple trades that can get you in on the action

• Tech has gotten all the attention lately as stocks have hit record highs, and as the bull market has become the longest of all time.
• But there are increasing signs that the bullish tide is shifting towards a new sector - one that appears to have great upside potential.
• We break down a handful of simple, long-only trades that can help you get involved.

Stock investors have had a lot to celebrate lately.

The benchmark S&P 500 hit all-time highs on Monday, and the ongoing bull market became the longest on record.

And as those traders assess their good fortune, they keep coming back to one major driver: the exceptional outperformance of tech stocks - particularly the mega-cap consortium known as FANG (Facebook, Amazon, Netflix, Google).

But as the party has raged in tech, another industry has quietly assumed the role of top performer: healthcare.

Consider this: Since the start of the third quarter, healthcare stocks in the S&P 500 have returned 10% - two full percentage points more than any other sector, including tech.

When it comes to fund flows, healthcare has also dominated. Since the beginning of July, the SPDR Healthcare Select Sector ETF has absorbed a whopping $1.4 billion of new capital. Meanwhile, the fund's tech counterpart - the SPDR Technology ETF has seen $63 million of outflows over the same period.

And then there's the matter of large institutional investors. Goldman Sachs finds that hedge funds now have healthcare as their largest net sector tilt, having rotated away from - you guessed it - tech.

The firm also looked at mutual funds and found a similar dynamic playing out. Fed up with disappointing returns from financials, they shifted into healthcare, which Goldman says saw the biggest allocation increase during the second quarter.

This all begs the question of why healthcare has become so desirable to investors of all types. Goldman attributes it to three things: a flurry of M&A activity, easing policy concerns, and volatility in the tech sector.

Going off this last point, it's important to note that the rotation out of tech and into other areas like healthcare is partially a byproduct of the sector's success. Tech has gotten historically extended by multiple different measures, so it's only natural that traders would start seeking areas with more upside.

So how can you take advantage of this market-wide shift towards healthcare? You have a few options.

Buy sector-wide exposure

One way would be to go broadly long the entire sector, perhaps through the SPDR ETF mentioned above - also known as XLV.

This is ideal for someone who wants wide-ranging exposure to the entire sector without having to go through the trouble of identifying mispriced single stocks. It's a more diversified bet, which means there's less probability of taking a big hit, but can also cap upside.

This option is particularly appealing because of how inexpensive XLV looks right now, relative to recent history. The chart below shows XLV's implied volatility, which measures expected price swings in the asset.

As you can see, implied volatility is low, which suggests options traders aren't expecting the types of swings that can be profitable for well-positioned investors. And by that token, XLV is cheap, since options' prices increase when turbulence is expected.

Go after single stocks in thriving areas - with Goldman's help

If you prefer single stocks to ETFs, Goldman has a handful of intriguing ideas.

Here are the companies the firm recommends, broken down into three convenient categories. All commentary on individual stocks are attributable to Goldman.

1. Pharma: Goldman expects the ongoing rally in this area to continue
   • Abbvie (ABBV) - A popular hedge fund short getting squeezed. It's the cheapest name in the group, with the highest dividend yield.
   • Pfizer (PFE) - A bellwether stock getting pulled higher by momentum on pharma. It has potential for significant gains around data that's set to be released on heart disease drug Tafamadis.
   • Merck (MRK) - Sentiment is shifting in positive fashion, and investors interest has picked up.
2. Medicaid managed care: Goldman is focused on upward earnings revision it calls "striking."
   
   • Centene (CNC) - Improving sentiment around both M&A optionality and fundamentals.
   • WellCare Health Plans (WCG) - Same as CNC, plus a 2019 that's shaping up for outstanding growth.
3. "Cheap" laggards - Worth noting year-to-date underperformers, given overall healthcare momentum.
   • Mylan (MYL), Abbvie (ABBV), AmerisourceBergen (ABC), Alexion Pharmaceuticals (ALXN), Bristol-Myers Squibb (BMY), Hologic (HOLX)

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