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Top 10 Health Care ETFs

VHT (Vanguard Health Care ETF) follows the MSCI US Investable Market Health Care 25/50 Index and is another broad index covering the entire spectrum of the health care industry. The fund was launched in January 2004. The expense ratio is .25%. AUM equal $670 million and average daily trading volume is a low 130K shares. The lower volume indicates Vanguard's financial advisor audience with more of a buy and hold philosophy. As of late October 2011 the annual dividend was $.098 making the current yield 1.92% and YTD return in excess of 7%.

Recently FocusShares in conjunction with Scottrade launched FHC (Focus Morningstar Health Care ETF) which tracks the Morningstar Health Care Index. The fund needs some seasoning but replicates well other ETFs in the same sector. The attraction is the lower expense ratio .19% and commission free trading for Scottrade clients.

Data as of October 2011

VHT Top Ten Holdings & Weightings

  1. Johnson & Johnson (JNJ): 10.50%
  2. Pfizer Inc (PFE): 9.51%
  3. Merck & Co Inc (MRK): 6.28%
  4. Abbott Laboratories (ABT): 4.70%
  5. UnitedHealth Group Inc (UNH): 3.26%
  6. Amgen Inc (AMGN): 3.14%
  7. Bristol-Myers Squibb Company (BMY): 2.85%
  8. Medtronic, Inc. (MDT): 2.39%
  9. Eli Lilly and Company (LLY): 2.26%
  10. Baxter International Inc. (BAX): 2.00%

IYH (iShares Dow Jones U.S. Health Care ETF) follows the Dow Jones U.S. Health Care Index which includes most constituents from the health care sector. The fund was launched in June 2006. The expense ratio is .48%. AUM equal $512 million while average daily trading volume is just fewer than 109K shares. As of late October 2011 the annual dividend was $1.07 making the current yield 1.60% with YTD return of 7.10%.

Data as of October 2011

IYH Top Ten Holdings & Weightings

  1. Johnson & Johnson (JNJ): 12.75%
  2. Pfizer Inc (PFE): 10.09%
  3. Merck & Co Inc (MRK): 7.36%
  4. Abbott Laboratories (ABT): 5.83%
  5. Bristol-Myers Squibb Company (BMY): 3.95%
  6. Amgen Inc (AMGN): 3.75%
  7. UnitedHealth Group Inc (UNH): 3.63%
  8. Eli Lilly and Company (LLY): 2.66%
  9. Medtronic, Inc. (MDT): 2.58%
  10. Baxter International Inc. (BAX): 2.36%

XPH (SPDR S&P Pharmaceuticals ETF) follows the S&P Pharmaceuticals Select Industry Index. The index covers every stock in the sector listed on the NYSE and NASDAQ by primarily equal weights. The fund was launched in June 2006. The expense ratio is .35%. AUM equal nearly $235 million and has an average daily trading volume 37K shares. As of late October 2011 the annual dividend is $.46 making the current yield .96% with YTD performance of just over 6.40%.

Some investors like the liquidity of PPH (ML Pharmaceutical HOLDRS) which as a trust follows a fixed holding of securities. In this case PPH only holds a little over 11 issues in the trust with JNJ, PFE and MRK representing nearly 60% of the holdings. This means you win big with those three or lose big.  

Data as of October 2011

XPH Top Ten Holdings & Weightings

  1. Bristol-Myers Squibb Company (BMY): 4.45%
  2. Perrigo Company (PRGO): 4.42%
  3. Salix Pharmaceuticals, Ltd. (SLXP): 4.41%
  4. Allergan, Inc. (AGN): 4.34%
  5. Watson Pharmaceuticals Inc. (WPI): 4.29%
  6. Merck & Co Inc (MRK): 4.25%
  7. Eli Lilly and Company (LLY): 4.23%
  8. Abbott Laboratories (ABT): 4.20%
  9. Johnson & Johnson (JNJ): 4.14%
  10. Jazz Pharmaceuticals, Inc. (JAZZ): 4.11%

 

IBB (iShares Nasdaq Biotech ETF) follows the NASDAQ Biotechnology Index which consists of biotech and pharmaceutical companies listed on the NASDAQ. The fund was launched in February 2005. The expense ratio is .48%. AUM equal $1.3 billion while average daily trading volume in near 837K shares. As of late October 2011 the YTD gain of 5.50%.

A very popular alternative choice is BBH (ML Biotech HOLDERS) which structured as a trust feature fixed holdings. The heavy weight of AMGN, GILD and BIIB together constitute nearly 90% of the holdings. This makes risks higher and rewards potentially greater. As such we would rather focus on the ETF segment.

Another alternative choice is XBI (SPDR Biotech ETF) which offers a more evenly balanced holding structure. The expense ratio is lower at .35%. The rate of return as of October 2011 is -6.90%.

FBT (First Trust Biotech ETF) follows the NYSE Arca Biotechnology Index. It has an equally weighted index but with only 20 constituents. It has a higher expense ratio of .60% and features as of late October 2011 YTD return of -8.97.10%.

Lastly, PBE (PowerShares Dynamic Biotech & Genome ETF) follows the Dynamic Biotechnology & Genome Intellidex Index which another "enhanced" index using quantitative measures to outperform more staid indexes. The expense ratio is .60% and the YTD return as of late October 2011 is -8.97%.

Both ProShares and Direxion Shares feature leveraged inverse and long ETFs with which to hedge or speculate that approximate trends in this ETF.

Data as of October 2011

IBB Top Ten Holdings

  1. Pharmasset, Inc. (VRUS): 8.01%
  2. Amgen Inc (AMGN): 7.93%
  3. Celgene Corporation (CELG): 6.16%
  4. Alexion Pharmaceuticals, Inc. (ALXN): 6.13%
  5. Gilead Sciences Inc (GILD): 5.16%
  6. Teva Pharmaceutical Industries Ltd ADR (TEVA): 4.47%
  7. Vertex Pharmaceuticals (VRTX): 4.40%
  8. Perrigo Company (PRGO): 4.38%
  9. Biogen Idec Inc (BIIB): 4.33%
  10. Regeneron Pharmaceuticals, Inc. (REGN): 3.81%

FXH (First Trust Health Care AlphaDEX ETF) follows the StrataQuant Health Care Index which is another "enhanced" index which more actively manages constituents via quantitative methodologies from the Russell 1000 Index. The fund was launched in May 2007. The expense ratio is .70%. AUM equal roughly $273 million and average daily trading volume is 365K shares. As of late October 2011, the annual dividend is $.06 making the yield.23% and an YTD return of 5.20%

Enhanced indexes can, and have for the most part generally outperformed more staid indexes in rising markets. We haven't done enough research to determine their relative performance in down markets.

Data as of October 2011

FXH Top Ten Holdings & Weightings

  1. Perrigo Company (PRGO): 2.64%
  2. Regeneron Pharmaceuticals, Inc. (REGN): 2.55%
  3. Cephalon Inc (CEPH): 2.47%
  4. Eli Lilly and Company (LLY): 2.45%
  5. Watson Pharmaceuticals Inc. (WPI): 2.39%
  6. Catalyst Health Solutions, Inc. (CHSI): 2.36%
  7. Cooper Companies (COO): 2.33%
  8. LifePoint Hospitals, Inc. (LPNT): 2.30%
  9. SXC Health Solutions Corporation (SXCI): 2.27%
  10. Vertex Pharmaceuticals (VRTX): 2.13%

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