As a result of the legal issues big-name companies like Pfizer (PFE) and Merck (MRK) have been dealing with, the pharmaceutical sector is among the worst performing sectors so far in 2008.

Several ETFs provide exposure to this sector, but the two that see most of the trading volume are the Pharmaceutical HOLDRs Trust (PPH) and the Select Healthcare Spyder (XLV). The performance of these two ETFs has been abysmal over the past year, with the PPH down 17.24 percent and the XLV down 11.13 percent. During this same time period, the S&P 500 was down only 6.54 percent. So you can see how the pharmaceutical sector has been lagging behind the rest of the market.

Is it time to start looking at pharma as a value play and buy some shares? I don’t think so. The legal issues are still piling up for these companies, and it could be a while before they are in the clear.

Another thing that will have a huge impact on this sector is the November presidential election. If a Democrat is elected, you can look for a healthcare reform push – which will certainly affect the drug companies. They may lose control over what they can charge for their products.

My advice is to steer clear of the pharmaceutical sector for the remainder of the year. Once the election is settled, you can reevaluate to see if pharmaceutical companies are a bargain then.

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Inspired by his high school economics teacher, Rick Pendergraft fell in love with the markets at an early age. He entered his first investing competition at 17, and opened his first brokerage account before he finished college. At the age of 23, on the third options trade he had ever placed, Rick turned $1,800 into $22,000 in less than a week, when the company he bought became the target of a takeover. He admits it was a stroke of luck, but it was a memorable education as to the leverage that options can provide.
After a ten year career in banking, Rick decided to pursue trading full-time. To get his foot in the door, he started out in the sales department at Schaeffer’s Investment Research. It was not long before his talent was recognized and he was invited to apprentice under Bernie Schaeffer, one of the top options traders in the world. Rick thrived in his new position and twice received the award for “Top Trader.”Rick has developed a loyal following of readers who are grateful for his timely warnings and profitable advice. He is widely recognized as a market expert and has been frequently quoted by Reuters, BusinessWeek, Forbes, USA Today, the New York Times, and the Washington Post. Rick’s primary focus is on identifying short and intermediate term rising and falling trends in the major market sectors. His analysis is based on technical factors along with indicators of market sentimentRick lives near Delray Beach, FL with his wife and three children.