12 Best Biotech and Health Care ETFs to Add to Your Portfolio

NEW YORK (TheStreet) -- Biotech stocks have been booming.

The iShares Nasdaq Biotechnology ETF (IBB) hit all-time highs in March. And there has even been talk of a biotech bubble.

That means, if you want to invest in biotech, you need to be careful. TheStreet compiled a list of the best-rated ETFs tracking biotech and health care, another hot sector.

TheStreet Ratings projects a stock's total return potential over a 12-month period, including both price appreciation and dividends. Based on 32 major data points, TheStreet Ratings uses a quantitative approach to rating more than 4,300 stocks to predict return potential for the next year. The model is both objective, using elements such as volatility of past operating revenues, financial strength and company cash flows, and subjective, including expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings.

Buying an S&P 500 stock that TheStreet Ratings rated a "buy" yielded a 16.56% return in 2014 beating the S&P 500 Total Return Index by 304 basis points. Buying a Russell 2000 stock that TheStreet Ratings rated a "buy" yielded a 9.5% return in 2014, beating the Russell 2000 index, including dividends reinvested, by 460 basis points last year.

With the growing popularity of ETF and mutual fund investing, TheStreet Ratings also tracks and evaluates the performance of mutual fund and exchange-traded funds. Users also have access to 2,000 ETF reports and 18,000 mutual fund reports.

The 12 biotech and health care ETFs on this list all have Buy, A+ ratings. Check out the best-rated biotech and health care ETFs for 2015.


FHLC Chart

1. Fidelity MSCI Health Care Index ETF (FHLC)
Net Assets: $237.2 million
Performance: A
Expense Ratio: 0.12%
Turnover: 4%

The fund seeks to provide investment returns that correspond generally to the performance of the MSCI USA IMI Health Care Index. The fund will invest at least 80% of its assets in securities of the MSCI USA IMI Health Care Index, which represents the performance of the health care sector in the U.S. equity market.

"We rate Fidelity MSCI Health Care Index ETF at A+. This overall rating indicates it is among the top 10% of all closed-end funds in its peer group. Positive factors that influence this rating include a low price volatility and low expense structure. The fund may be considered for investors seeking a Sector-Health/Biotechnology strategy."

"New Fund off to good start in the past year. The Fidelity MSCI Health Care Index ETF has returned an annual rate of 26.67% since inception. More recently, the fund has generated a total return of 25.14% in the past year, 15.70% in the past six months and 4.14% in the past three months. How does that compare to other equity funds? In the past year, it has outperformed 86% of them for the period ended 1/31/2015. On a year-to-date basis, FHLC returned 1.55% (as of Jan. 31)."

FXH Chart

2. First Trust Health Care AlphaDEX (FXH)
Net Assets: $2.4 billion
Performance: A+
Expense Ratio: 0.67%
Turnover: 81%

The fund seeks investment results before fees and expenses that correspond to the price and yield of an equity index called the AMEX Health Care AlphaDEX Index.

"We rate First Trust Health Care AlphaDEX at A+. This overall rating indicates it is among the top 10% of all closed-end funds in its peer group. Positive factors that influence this rating include a well-above-average total return, low expense structure and long-term portfolio management tenure. The fund invests approximately 100% of its assets in stocks and may be considered for investors seeking a Sector-Health/Biotechnology strategy."

"Total return ranks very high in comparison with peers over the last three years. The First Trust Health Care AlphaDEX has returned an annual rate of 15.80% since inception. More recently, the fund has generated a total return of 23.77% in the past five years, 27.93% in the past three years and 22.28% in the past year. How does that compare to other equity funds? In the past five years, it has outperformed 97% of them. It has also outpaced 97% of its competitors on a three-year basis and 83% of them over the past year for the period ended 1/31/2015. On a year-to-date basis, FXH returned 1.49% (as of Jan. 31)."

GRX Chart

3. Gabelli Healthcare & WellnessRx Tr (GRX)
Net Assets: $209 million
Performance: A
Expense Ratio: 0.67%
Turnover: 17%

The primary investment objective of the fund is long-term growth of capital and secondarily is income. The fund seeks opportunities for long-term growth presented in the health care and wellness industries. The fund may invest at least 80% of its assets in equity securities and income-producing securities of domestic and foreign companies involved to a substantial extent in providing products, services or equipment for the health care and wellness industries.

"We rate Gabelli Healthcare & WellnessRx Tr at A+. This overall rating indicates it is among the top 10% of all closed-end funds in its peer group. Positive factors that influence this rating include a well-above-average total return and low price volatility. The fund invests approximately 94% of its assets in stocks and may be considered for investors seeking a Sector-Health/Biotechnology strategy."

"Total return ranks very high in comparison with peers over the past three years. The Gabelli Healthcare & WellnessRx Tr has returned an annual rate of 9.85% since inception. More recently, the fund has generated a total return of 21.07% in the past five years, 26% in the past three years and 12.85% in the past year. How does that compare to other equity funds? In the past five years, it has outperformed 95% of them. It has also outpaced 96% of its competitors on a three-year basis and 68% of them over the past year for the period ended 1/31/2015. On a year-to-date basis, GRX returned 1.15% (as of Jan. 31)."

IHE Chart

4. iShares US Pharmaceuticals ETF (IHE)
Net Assets: $737.5 million
Performance: A+
Expense Ratio: 0.45%
Turnover: 31%

The fund seeks investment results that correspond generally to the price and yield performance before fees and expenses of the Dow Jones U.S. Select Pharmaceuticals Index. The index includes pharmaceutical companies such as manufacturers of prescription or over-the-counter drugs or vaccines but excludes producers of vitamins.

"We rate iShares US Pharmaceuticals ETF at A+. This overall rating indicates it is among the top 10% of all closed-end funds in its peer group. Positive factors that influence this rating include a well-above-average total return, low price volatility, low expense structure and long-term portfolio management tenure. The fund invests approximately 99% of its assets in stocks and may be considered for investors seeking a Sector-Health/Biotechnology strategy."

"Total return ranks very high in comparison with peers over the past three years. The iShares US Pharmaceuticals ETF has returned an annual rate of 15.43% since inception. More recently, the fund has generated a total return of 24.08% in the past five years, 26.74% in the past three years and 29.67% in the past year. How does that compare to other equity funds? In the past five years, it has outperformed 97% of them. It has also outpaced 96% of its competitors on a three-year basis and 91% of them over the past year for the period ended 1/31/2015. On a year-to-date basis, IHE returned 2.13% (as of Jan. 31)."

IHF Chart

5. iShares US HealthCare Providers ETF (IHF)
Net Assets: $614.2 million
Performance: A
Expense Ratio: 0.45%
Turnover: 14%

The fund seeks investment results that correspond generally to the price and yield performance before fees and expenses of the Dow Jones U.S. Select Health Care Providers Index. The index includes companies that are health care providers such as owners and operators of health maintenance organizations, hospitals, clinics, dentists, opticians, nursing homes, rehabilitation and retirement centers.

"We rate iShares US HealthCare Providers ETF at A+. This overall rating indicates it is among the top 10% of all closed-end funds in its peer group. Positive factors that influence this rating include a well-above-average total return, low price volatility, low expense structure and long-term portfolio management tenure. The fund invests approximately 100% of its assets in stocks and may be considered for investors seeking a Sector-Health/Biotechnology strategy."

"Total return ranks very high in comparison with peers over the past three years. The iShares US HealthCare Providers ETF has returned an annual rate of 11.18% since inception. More recently, the fund has generated a total return of 20.50% in the past five years, 24.14% in the past three years and 27.92% in the past year. How does that compare to other equity funds? In the past five years, it has outperformed 95% of them. It has also outpaced 96% of its competitors on a three-year basis and 90% of them over the past year for the period ended 1/31/2015. On a year-to-date basis, IHF returned 0.19% (as of Jan. 31)."

IHI Chart

6. iShares US Medical Devices ETF (IHI)
Net Assets: $735.6 million
Performance: A
Expense Ratio: 0.45%
Turnover: 44%

The fund seeks investment results that correspond generally to the price and yield performance before fees and expenses of the Dow Jones U.S. Select Medical Equipment Index. The index includes medical equipment companies such as manufacturers and distributors of medical devices such as magnetic resonance imaging scanners, prosthetics pacemakers, X-ray machines and other non-disposable medical devices.

"We rate iShares US Pharmaceuticals ETF at A+. This overall rating indicates it is among the top 10% of all closed-end funds in its peer group. Positive factors that influence this rating include a well-above-average total return, low price volatility, low expense structure and long-term portfolio management tenure. The fund invests approximately 100% of its assets in stocks and may be considered for investors seeking a Sector-Health/Biotechnology strategy."

"Total return ranks very high in comparison with peers over the past three years. The iShares US Medical Devices ETF has returned an annual rate of 10.30% since inception. More recently, the fund has generated a total return of 17.19% in the past five years, 20.53% in the past three years and 21.95% in the past year. How does that compare to other equity funds? In the past five years, it has outperformed 87% of them. It has also outpaced 94% of its competitors on a three-year basis and 83% of them over the past year for the period ended 1/31/2015. On a year-to-date basis, IHI returned 0.40% (as of Jan. 31)."

IXJ Chart

7. iShares Global Healthcare (IXJ)
Net Assets: $1.26 billion
Performance: A
Expense Ratio: 0.48%
Turnover: 5%

The fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the S&P Global Healthcare Sector Index. Component companies include health care providers, biotechnology companies, and manufacturers of medical supplies, advanced medical devices and pharmaceuticals.

"We rate iShares Global Healthcare at A+. This overall rating indicates it is among the top 10% of all closed-end funds in its peer group. Positive factors that influence this rating include a well-above-average total return, low price volatility, low expense structure and long-term portfolio management tenure. The fund invests approximately 100% of its assets in stocks and may be considered for investors seeking a Sector-Health/Biotechnology strategy."

"Total return ranks very high in comparison with peers over the past three years. The iShares Global Healthcare has returned an annual rate of 7.22% since inception. More recently, the fund has generated a total return of 17.58% in the past five years, 22.96% in the past three years and 19.76% in the past year. How does that compare to other equity funds? In the past five years, it has outperformed 89% of them. It has also outpaced 95% of its competitors on a three-year basis and 80% of them over the past year for the period ended 1/31/2015. On a year-to-date basis, IXJ returned 2.39% (as of Jan. 31)."

IYH Chart

8. iShares US Healthcare ETF (IYH)
Net Assets: $2.66 billion
Performance: A
Expense Ratio: 0.45%
Turnover: 5%

The fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones U.S. Healthcare Sector Index. The index measures the performance of the health care sector of the U.S. equity market. Component companies include health care providers, biotechnology companies, and manufacturers of medical suppliers, advanced medical devices and pharmaceuticals. As of March 31, 2000, the index consisted of 171 stocks. Its three largest stocks were Merck & Company Inc. (MRK), Pfizer Inc. (PFE) and Bristol-Myers Squibb Company (BMY). The fund would concentrate its investment in a particular industry or group of industries to approximately the same extent the index is so concentrated.

"We rate iShares US Healthcare ETF at A+. This overall rating indicates it is among the top 10% of all closed-end funds in its peer group. Positive factors that influence this rating include a well-above-average total return, low price volatility, low expense structure and long-term portfolio management tenure. The fund invests approximately 100% of its assets in stocks and may be considered for investors seeking a Sector-Health/Biotechnology strategy."

"Total return ranks very high in comparison with peers over the past three years. The iShares US Healthcare ETF has returned an annual rate of 7.58% since inception. More recently, the fund has generated a total return of 20.10% in the past five years, 26.65% in the past three years and 25.51% in the past year. How does that compare to other equity funds? In the past five years, it has outperformed 94% of them. It has also outpaced 96% of its competitors on a three-year basis and 87% of them over the past year for the period ended 1/31/2015. On a year-to-date basis, IYH returned 1.79% (as of Jan. 31)."

VHT Chart 

9. Vanguard HealthCare Index ETF (VHT)
Net Assets: $3.45 billion
Performance: A+
Expense Ratio: 0.12%
Turnover: 5%

The fund seeks to track the performance of the MSCI US Investable Market Health Care Index, an index of stocks of large, medium-size, and small U.S. companies within the health care sector. The sector is made up of two main industry groups. The first group includes companies that manufacture health care equipment and supplies or provide health care-related services (such as distributors of health care products, providers of basic health care services, and owners and operators of health care facilities and organizations). The second group includes companies primarily involved in the research, development, production, and marketing of pharmaceuticals and biotechnology products.

"We rate Vanguard HealthCare Index ETF at A+. This overall rating indicates it is among the top 10% of all closed-end funds in its peer group. Positive factors that influence this rating include a well-above-average total return, low price volatility, low expense structure and long-term portfolio management tenure. The fund invests approximately 98% of its assets in stocks and may be considered for investors seeking a Sector-Health/Biotechnology strategy."

"Total return ranks very high in comparison with peers over the past three years. The Vanguard HealthCare Index ETF has returned an annual rate of 10.28% since inception. More recently, the fund has generated a total return of 20.76% in the past five years, 26.98% in the past three years and 25.27% in the past year. How does that compare to other equity funds? In the past five years, it has outperformed 95% of them. It has also outpaced 97% of its competitors on a three-year basis and 87% of them over the past year for the period ended 1/31/2015. On a year-to-date basis, VHT returned 1.69% (as of Jan. 31)."

XHE Chart

10. SPDR S&P Health Care Equipment ETF (XHE)
Net Assets: $33.7 million
Performance: A-
Expense Ratio: 0.35%
Turnover: 46%

The fund seeks to replicate the performance of an index derived from the health care equipment and supplies segment of a U.S. total market composite index. The fund generally invests substantially all, but at least 80%, of its total assets in the securities comprising the index.

"We rate SPDR S&P Health Care Equipment ETF at A+. This overall rating indicates it is among the top 10% of all closed-end funds in its peer group. Positive factors that influence this rating include a well-above-average total return, low price volatility, and low expense structure. The fund invests approximately 100% of its assets in stocks and may be considered for investors seeking a Sector-Health/Biotechnology strategy."

"Total return ranks very high in comparison with peers over the past three years. The SPDR S&P Health Care Equipment ETF has returned an annual rate of 16.54% since inception. More recently, the fund has generated a total return of 19.37% in the past three years, 16.75% in the past year and 16.75% in the past six months. How does that compare to other equity funds? In the past three years, it has outperformed 92% of them. It has also outpaced 76% of its competitors on a one-year basis for the period ended 1/31/2015. On a year-to-date basis, XHE returned 2.14% (as of Jan. 31)."

XHS Chart

11. SPDR S&P Health Care Services ETF (XHS)
Net Assets: $117.6 million
Performance: A
Expense Ratio: 0.35%
Turnover: 33%

The fund seeks to replicate as closely as possible the performance of an index derived from the health care providers and services segment of a U.S. total market composite index. The index, S&P Health Care Services Select Industry, represents the Health Care Providers and Services sector of the S&P Total Market Index.

"We rate SPDR S&P Health Care Services ETF at A+. This overall rating indicates it is among the top 10% of all closed-end funds in its peer group. Positive factors that influence this rating include a well-above-average total return, low price volatility and low expense structure. The fund invests approximately 100% of its assets in stocks and may be considered for investors seeking a Sector-Health/Biotechnology strategy."

"Total return ranks very high in comparison with peers over the past three years. The SPDR S&P Health Care Services ETF has returned an annual rate of 32.81% since inception. More recently, the fund has generated a total return of 24.64% in the past three years, 23.11% in the past year and 10.75% in the past six months. How does that compare to other equity funds? In the past three years, it has outperformed 96% of them. It has also outpaced 84% of its competitors on a one-year basis for the period ended 1/31/2015. On a year-to-date basis, XHS returned -1.07% (as of Jan. 31)."

XLV Chart

12. Health Care Select Sector SPDR (XLV)
Net Assets: $11.13 billion
Performance: A
Expense Ratio: 0.15%
Turnover: 3%

The fund invests in health care equipment and supplies, health care providers and services, biotechnology, and pharmaceutical industries.

"We rate Health Care Select Sector SPDR at A+. This overall rating indicates it is among the top 10% of all closed-end funds in its peer group. Positive factors that influence this rating include a well-above-average total return, low price volatility, low expense structure and long-term portfolio management tenure. The fund invests approximately 100% of its assets in stocks and may be considered for investors seeking a Sector-Health/Biotechnology strategy."

"Total return ranks very high in comparison with peers over the past three years. The Health Care Select Sector SPDR has returned an annual rate of 8.21% since inception. More recently, the fund has generated a total return of 19.74% in the past five years, 26.31% in the past three years and 25.60% in the past year. How does that compare to other equity funds? In the past five years, it has outperformed 94% of them. It has also outpaced 96% of its competitors on a three-year basis for the period ended 1/31/2015. On a year-to-date basis, XLV returned 1.30% (as of Jan. 31)."

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