XLV - 3 Buy Rated Healthcare ETFs to Buy for a Biden Presidency

As uncertainty regarding the pandemic refuses to subdue, investors want to look at a sector that is recession-proof, and healthcare is the safest bet. The varied range of offerings from healthcare companies includes diagnostics, medical devices, medicines for rare conditions, prospective vaccines, and insurance and hospice services. These ensure that this sector is less impacted by volatility and IS always in demand.

According to Goldman Sachs' chief US equity Strategist, David Kostin, investors that are considering value stocks with upside must consider the healthcare sector. He further added that Joe Biden’s Presidency could be a major catalyst for further growth of the sector. The healthcare sector had been bracing for the adverse impact of imminent drug pricing regulations and tax increases. Also, the administration led by a Biden-Harris team might design policies to extend the reach of healthcare to more citizens in the United States.

However, individual stocks may be slightly risky at this point amid a lot of uncertainty. ETFs could help you hedge the existing risk alongside broad and diversified exposure at lesser operating costs. The Health Care Select Sector SPDR Fund (XLV), iShares U.S. Healthcare Providers ETF (IHF), and Invesco DWA Healthcare Momentum ETF (PTH) are the best ETFs to gain exposure to the healthcare sector at this juncture.

Health Care Select Sector SPDR Fund (XLV)

XLV is one of the most popular ETFs for exposure to the health care sector in the United States. This ETF was launched in 1998 by State Street Global Advisors. It is managed by SSGA Funds Management. XLV invests in growth and value stocks of large cap healthcare companies. The fund is non-diversified and invests across sectors like pharmaceuticals, health care equipment & supplies, health care providers & services, biotechnology and other forms of healthcare technology. It has AUM of $24. billion and an expense ratio of 0.13%, versus the category average of 0.46%.

The fund currently holds 65 companies with major exposure in the pharmaceutical sector. The top holdings of the company are Johnson & Johnson (JNJ) and UnitedHealth Group (UNH), with weights of 8.9% and 8.2%, respectively. Some of the other major holdings include Thermo Fisher Scientific (TMO), Merck & Co. (MRK), and Pfizer (PFE), each with a 4.9% weighting.

XLV’s closed yesterday’s trading session at $110.72, climbing more than 9.1% year-to-date. The fund witnessed net inflows of $54.3 million in the past three months and returned 69.5% over the past five years.

How does XLV stack up for the POWR Ratings?

A for Trade Grade

A for Buy & Hold Grade

A for Industry Rank

A for Overall POWR Rating.

It is ranked #1 out of 38 ETFs in the Health & Biotech ETFs group.

iShares U.S. Healthcare Providers ETF (IHF)

IHF offers exposure to a narrow range of health care industries. This fund invests in companies offering health care providers, health care equipment, and services. This fund was launched in 2006 by BlackRock. The portfolio has a few big names and limited individual security diversification. It includes very specialized healthcare sector companies across multiple market caps. The AUM of IHF is $1.1 billion and it has an expense ratio of 0.43%, versus the category average of 0.46%.

The fund currently holds 55 companies with major exposure in health insurance, diagnostics and specialized treatment. It has an 96.3% allocation to Health Care Providers & Services. The top holdings include UNH, Anthem (ANTM), CVS Health Corporation (CVS), and Cigna Corporation (CI), with weights of 22.8%, 11%, 10.9%, and 4.9%, respectively.

On a year-to-date basis, IHF has gained 14.4% to close yesterday’s trading session at $229.38. Over the past year, the fund saw net inflows of $58.5 million and has returned 25.7% over this period.

IHF’s POWR Ratings reflect a promising outlook. It has an overall rating of “Strong Buy” with an “A” for Trade Grade, Buy & Hold Grade, Peer Grade, and Industry Rank. Among 38 ETFs in the Health & Biotech ETFs group, it’s ranked #11.

Invesco DWA Healthcare Momentum ETF (PTH)

PTH is an index-based fund launched and managed by Invesco Capital Management since 2006.. For investors who want an exposure to high growth stocks for the long-term, this fund is an ideal option. PTH adopts a momentum-driven strategy for stock selection. It picks up the healthcare stocks which demonstrate strength and eliminates the ones with relative weakness.

PTH has an expense ratio of 0.60%, which is relatively higher than the category average of 0.46%. However, this fund is appropriate for those who wish to reap benefits of a sector rotation strategy. PTH uses a full replication technique and replicates the performance of the Dynamic Healthcare Sector Intellidex Index.

The fund has a total of 51 stocks and top holdings include Amedisys (AMED), Danaher Corporation (DHR), Thermo Fisher Scientific (TMO), and Repligen Corporation (RGEN), with weights of 5.4%, 5.3%, 5.2%, and 4.4%, respectively. The majority of exposure of this fund is in the Biotechnology, Health care Providers & Services, Pharmaceuticals and Medical Equipment industries. PTH has AUM of $587.4 million.

PTH closed yesterday’s trading session at $149.31, posting a year-to-date gain of 55.1%. During the past year, the fund witnessed $271.88 million in net fund inflows. PTH has gained 80.2% over this period.

PTH is rated a “Strong Buy” in our POWR Ratings system. It holds an “A” in Trade Grade, Buy & Hold Grade, Peer Grade, and Industry Rank. It is ranked #14 out of 38 ETFs in the Health & Biotech ETFs group.

Want More Great Investing Ideas?

9 “MUST OWN” Growth Stocks for 2021

Is the Bull Market Back on Track?

5 WINNING Stocks Chart Patterns

XLV shares were trading at $111.92 per share on Friday afternoon, up $1.20 (+1.08%). Year-to-date, XLV has gained 11.32%, versus a 12.32% rise in the benchmark S&P 500 index during the same period.

About the Author: Namrata Sen Chanda

Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education.

More...