NEW YORK (Fabian Capital Management) -- As a sector, health care has a lot to offer in terms of fundamental and technical data that supports ongoing innovation and profitability. The aging baby boomer population combined with an increased focus on adorable health insurance is continuing to promote a focus on new drugs and medical devices aimed to increase quality of life.
From a performance standpoint, the Health Care Select Sector SPDR (XLV) has significantly and consistently beaten the SPDR S&P 500 ETF (SPY) over multiple time frames. The following table illustrates the differences in average annual return of both funds over the last one, three and five years.
The current list of health care-related ETFs (excluding leverage) now stands at 25. While XLV works well as a large-cap benchmark for the health care sector, there are a number of ETFs that track a more sophisticated group of companies. These can includes: industry groups, small companies, fundamental indexes, international stocks, and a host of other categories.
Often times these unique ETFs can produce much superior returns when compared to a plain-vanilla index. Being in the right spot at the right time, such as iShares NASDAQ Biotechnology ETF (IBB) return of 65.51% in 2013, can lead to a tremendous advantage in your portfolio.
The following funds represent areas that have had the strongest performance of the health care group in 2014. Some of which you may never have heard of before.
The Market Vectors Pharmaceutical ETF (PPH) is the best-performing health care industry ETF with a total return of 18.29% this year. This fund invests in the 25 largest and most liquid U.S.-listed pharmaceutical companies based on market cap and trading volume. PPH charges a net expense ratio of 0.35% and has a 30-day SEC yield of 1.84%.