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Health Care for a Fit ETF

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( ETF Expert) -- The weight of the health care sector in a given ETF can vary dramatically. In the S&P 500 SPDR Trust (SPY), health care accounts for about 12%. In contrast, First Trust Dividend (FDL) commits roughly 30% to the segment.

Naturally, there are specific sector and sub-sector funds that provide 100% exposure. There's 100% health care for the broader S&P 500 SPDR Select Health Care (XLV). And for those who want to narrow in on a sub-segment like pharmaceuticals, they can get their prescription filled through a fund like PowerShares Dynamic Pharmaceuticals Portfolio (PJP).

Over the last 12 months, health care ETFs have been on a roll. And, in fact, I wondered if we might be looking at a set of circumstances in the financial markets where more exposure is better.

For instance, while the Nasdaq 100 is known for some of its biotech corporations, health care only comprises 10% of the market cap weight in PowerShares Nasdaq 100 (QQQ). How did XLV, the 100% health care proxy, stack up against the info-tech heavy QQQ? Similarly, how might PowerShares Dynamic Large-Cap Value (PWV) -- a fund with a 20% health weight that tracks an unfollowed "dynamic" index -- rate against a global fund with 100% weight in the iShares S&P Global Health Care Fund (IXJ)?

Granted, I won't necessarily be drawing conclusions from "apples-to-apples" comparisons. More like . . . apples to oranges. On the other hand, we certainly can examine stock funds on one-year performance and these candidates are all large-cap stock funds that trade on a U.S. exchange. (In other words, apples and oranges are round fruits that grow on trees.)
An Apple A Day Keeps The Doctor...
Health Weight YOY %
Biotech HOLDRs (BBH) 100.0% 18.2%
PowerShares Dynamic Pharmaceuticals (PJP) 100.0% 17.1%
First Trust Dividend (FDL) 29.5% 12.9%
WisdomTree Dividend Excluding Financials (DTN) 11.0% 12.3%
SPDR Select Health Care (XLV) 100.0% 9.3%
PowerShares NAASDAQ 100 (QQQ) 9.8% 9.1%
iShares S&P Global Health (IXJ) 100.0% 6.9%
iShares Medical Devices (IHI) 100.0% 5.4%
S&P 500 SPDR Trust (SPY) 12.5% 5.1%
PowerShares Dynamic Large Value (PWV) 20.0% 5.0%

At first blush, one might be quick to suggest that the more heath care exposure, the better the year-over-year performance. After all, the dividend fund with the higher health care weighting out-hustled the dividend fund with the lower health care weighting. Moreover, three of the "Top 5" had 100% health weights.

Then again, circumstances may more accurately reflect the fact that "pharma/biotech/drugs" has been one of the hottest sub-segments around. Absent the "meds," one finds that dividend funds outperformed the broader based SPDR Select Health Care (XLV). Furthermore, funds with far less health care exposure than the 20% in PowerShares Large Cap Value (PWV) registered stronger percentage performances.
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FDL $25.76 -0.04%
DTN $74.53 -0.47%
XLP $52.96 0.30%
PJP $60.93 -1.88%
BBH $102.91 -2.33%


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