Three Healthcare ETFs That May be Poised to Rebound
Jeff is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Political events have always had an effect on the state of the healthcare industry. Now that a lot of the unknowns from a few years ago have come and gone, it appears that structural adjustments to the industry have commenced and a return to positive momentum is in place.
Exchange-traded funds that are based on indexes in this sector offer a cost effective, tax efficient, and transparent portfolio that take the weight off of the individual security selection process. Stocks of companies in the healthcare industry have a greater degree of complexity to review due to the multitude of external and ever changing factors that influence stock prices. Here are three ETFs worth considering.
The Health Care Select Sector SPDR Fund (NYSEMKT: XLV) seeks performance results that correspond with The Health Care Select Sector Index. XLV was started on Dec of 1998 which gives it a longer time period to analyze historical performance. What is noticeable about XLV is that a nice three-year upward trend is intact and the shorter reporting periods indicate that this may continue. The expense ratio is reported at 0.18% and the top holding is allocated to Johnson & Johnson (NYSE: JNJ), with a weighting of 12.37%. There are a total of 54 stocks held, which indicates a concentration towards this sector. This may result in increased volatility when market conditions change. Additional info is found by following this link.
The iShares Dow Jones US Healthcare Sector Index Fund (NYSEMKT: IYH) tracks the Dow Jones US Healthcare Sector Index and holds 117 stocks. Started in June of 2000 IYH also has developed a longer performance history that aids in analyzing past performance in various market conditions. The three-year and shorter returns history indicate the continuance of probable increasing returns. Though not guaranteed it seems that the specter of Obama care is over and factored into the industry. The top holding of IYH is Johnson & Johnson (NYSE: JNJ), with 11.32% of the portfolio in this one stock. Additional resources to research IYH can be found here http://us.ishares.com/product_info/fund/overview/IYH.htm
The First Trust NYSE Arca Biotechnology Index Fund (NYSEMKT: FBT) follows the price and yield of the Amex Biotechnology Index. Though FBT holds biotechnology stocks, these holdings are closely tied to supporting the healthcare industry and this sector gives access to part of the future of healthcare. FBT has an operating ratio of 0.61% and the top holding is Regeneron Pharmaceuticals Inc. (NASDAQ: REGN), with 6.22% of the fund held in this stock. With an inception date of June of 2006, the track record of returns appears to be volatile, yet positive. FBT does appear to offer the prospects of delivering returns and may require adjusting positions as its performance changes with market conditions. First Trust has place more information to review on this webpage http://www.ftportfolios.com/Retail/Etf/EtfSummary.aspx?Ticker=FBT
The outlook for the healthcare sector is positive. The above ETFs have shown that a change in the trend may be well underway and that this should continue until the next unforeseen destabilizing event occurs. Allocating funds to this sector may prove to be prudent and positions should be maintained for the long-term. Monitoring and adjustments are prudent tools for individualized risk management.
Jeffrey L (Jeff) Stouffer is associated with Kingsview Asset Management, LLC and manages the Alexandria Virginia office. He has earned the privilege of using the CAIA and CFP® marks and holds several FINRA licenses. As a practicing financial advisor serving the needs of individual and owners of businesses, he believes in using a wide range of strategies including alternative investments. For additional information, he can be contact via email at jeff.stouffer@kingsviewassetmanagement.com
jlstouffer has no positions in the stocks mentioned above. The Motley Fool owns shares of Johnson & Johnson. Motley Fool newsletter services recommend Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
