Top 3 Healthcare ETFs for 2017 – TheTradersWire

Top 3 Healthcare ETFs for 2017


Top 3 Healthcare ETFs for 2017

By Sheila Olson | Updated November 14, 2017 — 6:59 PM EST

Investors with an eye on the healthcare market weren’t surprised when Charles Schwab boosted its outlook on this sector to Outperform in January 2017. After all, demand is on the rise for healthcare products and services, and companies in this sector are flush with cash, which means better dividend yields and even stock buybacks that enhance shareholder value.

Meanwhile, the newly minted Republican administration’s vow to “repeal and replace” the Affordable Care Act appeared to be a catalyst for the sector in the early part of 2017, holding the promise of a far-reaching rollback of the growth-killing regulatory regime. Although the Republican plans to overhaul the healthcare system have hit repeated roadblocks, the healthcare sector has remained exceptionally resilient throughout the year. (See also: Healthcare ETFs See Modestly Higher Valuations.)

With the sector turning in a strong performance despite the policy-related uncertainty, the final months of 2017 might be the perfect time to dip your toes into the healthcare market. Take a look at these top healthcare exchange-traded funds (ETFs) that could be ready to gain on a bullish market. Funds were chosen on a combination of year-to-date (YTD) performance and assets under management. YTD performance figures reflect the period from Jan. 1, 2017, through Nov. 14, 2017. All figures were current as of Nov. 14.

Health Care Select Sector SPDR ETF (XLV)

  • Issuer: State Street Global Advisors
  • YTD Performance: 18.99%
  • Net Assets: $17.31 billion
  • Expense Ratio: 0.14%

XLV tracks the healthcare stocks in the S&P 500, weighted by market cap. It is the oldest fund in this segment and by far the largest. As a reflection of the U.S. healthcare market, this fund is hard to beat. It stands head and shoulders above its peers by nearly every metric – including liquidity and holding costs.

Of course, drawing from the S&P 500, the fund is heavily weighted toward mega caps – think Johnson & Johnson (JNJ), Pfizer Inc. (PFE) and UnitedHealth Group Incorporated (UNH). XLV is fairly concentrated, with the top 10 holdings making up nearly 55% of the fund’s portfolio of 60 equities. XLV’s one-year, three-year and five-year annualized returns are solid at 22.31%, 8.04% and 16.99%, respectively. (See also: 3 Charts Suggesting Traders Are Bullish on Healthcare.)

Vanguard Health Care Index Fund (VHT)

  • Issuer: Vanguard
  • YTD Performance: 20.42%
  • Net Assets: $8.01 billion
  • Expense Ratio: 0.10%

Cheap and diversified, VHT holds 350 equities comprising the MSCI U.S. Investable Market Health Care 25/50 Index. It pulls healthcare stocks – pharmaceuticals, biotech, medical equipment, software and IT – from the top 98% of the total U.S. stock market capitalization. The ETF is still somewhat concentrated, however, with the top 10 holdings accounting for over 45% of the fund’s portfolio.

As with all Vanguard funds, VHT publishes its holdings only once a month, so there’s less transparency compared with other funds. However, for buy-and-hold investors, that’s rarely a problem. VHT offers broad exposure to the healthcare sector with a very friendly price tag. Its one-year, three-year and five-year annualized returns are 24.26%, 8.57% and 17.65%, respectively. (See also: Healthcare ETFs Head to Head: XLV vs. VHT.)

SPDR S&P Biotech ETF (XBI)

  • Issuer: State Street Global Advisors
  • YTD Performance: 41.63%
  • Net Assets: $4.25 billion
  • Expense Ratio: 0.35%

This fund takes a novel approach to the U.S. biotech sector – it equal weights its portfolio, so performance is more tightly tied to small-cap companies, some of which have yet to bring a drug to market. The approach appears to be working, however, since XBI’s impressive one-year, three-year and five-year annualized returns (49.34%, 14.05% and 25.19%, respectively) are crushing the competition.

XBI is a bit more expensive to own than other funds, but it’s still relatively efficient for a straight sector play that tilts toward small caps. There are currently 92 equities in its basket of holdings, and the top 10 holdings account for just 26% of the fund’s portfolio. (See also: Biotech’s Breakout to Start in the Fourth Quarter.)


Published at Tue, 14 Nov 2017 23:59:00 +0000

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