This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Four ETF Plays for Biotech

NEW YORK ( TheStreet) -- Last week a number of biotech players, including Millipore (MIL), OSI Pharmaceuticals (OSIP), Intermune (ITMN) and Sequenom (SQNM) (SQNM) turned in double-digit gains in the volatile health care subsector.

While last week's performance was impressive, it pales in comparison to Human Genome Sciences' (HGSI) gains over the past year. Today, the stock trades at over $30, more than 5,000% higher than a year ago.

The most notable single-day boost for this company occurred on July 20 when the stock jumped 276% after reporting strong results for its highly anticipated Lupus drug.

On the other side, health care stocks do fall, leaving investors with a bitter taste. For example, when Medivation's (MDVN) Alzheimer's drug failed in a late-stage trial last week, shares of the firm fell over 65% in a single session.

Given such violent swings, ETF companies have adopted some unique approaches for investors in the biotech industry.

Though there a number of biotech ETFs, three -- SPDR S&P Biotech (XBI), iShares Nasdaq Biotech (IBB), and First Trust NYSE Arca Biotech (FBT) -- stand out for their huge size and liquidity. Deciding on which to invest in depends on a person's investing goals.

Conservative investors looking for a stable play on the biotech industry should turn to IBB. IBB has assets weighted toward the largest companies in the industry, such as Amgen (AMGN - Get Report) in the top spot, with 10.2% of assets, followed by Gilead (GILD - Get Report), with 8.1%, and Teva Pharmaceutical (TEVA - Get Report), with 7.9%.

By tracking such large firms, the instrument is far are less susceptible to violent movements that smaller industry players are susceptible to.

Though stability may appeal to risk-adverse individuals, IBB may prove to be too reserved for those looking for more pop. Investors looking for more dramatic swings will find FBT or XBI to be more to their liking.

Rather than tracking the strongest, most stable biotech companies, these funds employ an equal-weighted strategy across biotech firms of all sizes. This strategy allows investors to internalize large gains while avoiding bloated exposure to any single firm that may be a big flop.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
IBB $265.75 -1.90%
FBT $89.94 -2.50%
XBI $52.94 -3.70%
AMGN $156.38 -1.60%
GILD $87.15 -2.10%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs