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The sector rotation strategy to play at present is healthcare and biotechnology, and Ratings has identified the three ETFs below. Investors should note that although these funds are classified in the health-care space, a large percentage of their holdings are in the pharmaceutical and biotechnology sectors.

Outstanding one-month and three-month returns are some of the best we have seen in any category of funds in our database.

Given the current bear market, these performances seem all the more outstanding. The question is whether the health-care and biotech sectors can continue to earn these well above market returns. It's probably unlikely -- but that doesn't take away the chance for a genuine buying opportunity at the first sign of a pullback. They may be priced a little high right now, so it may be best to wait for a fall in the price of the ETFs' shares as an entry point.

Health care, biotech and pharmaceuticals in particular are not bad sectors to be in as the economy continues to sour.

The holding common to all three ETFs, which carries a notable weighting, is



. The

Biotech Holders Trust


has 42% of its assets invested in this company.



is common to two of the funds.

Gilead Sciences


is another holding that has performed well throughout 2008 and is common to two of the funds.

Fund Name


TSC Grade

1 Month Return

3 Month Return

SPDR S&P Biotech ETF





HOLDRS Biotech





First Trust AMEX Biotechnology





Sam Patel, CFA, is the manager of mutual fund research for the Ratings.

In keeping with TSC's Investment Policy, employees of Ratings with access to pre-publication ratings data must pre-clear any potential trade through the legal department, and are prohibited from trading any security that is the subject of an unpublished rating revision until the second business day after the rating is published.

While Patel cannot provide investment advice or recommendations, he appreciates your feedback;

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