IBB - 5 Top Biotechnology ETFs
Investing in biotechnology companies can be a long road to make gains given the volatility of the sector; even with a good understanding of the system, no one can predict what treatment, device, or therapy will give investors the biggest return, which makes biotechnology ETFs (exchange traded funds) a secure option.
ETFs are a safe route that can minimize losses while also benefiting from the profit of (often) hundreds of companies instead of focusing on gains and losses of a stock.
ETFs tend to be a more stable investment than the smaller-cap stocks that lead to volatility. With this in mind, here’s a brief look at the five top biotechnology ETFs and their holdings, according to ETFdb.com, for investing consideration. All biotechnology ETFs have assets over US$400 million with all numbers and figures current at the time of publication.
1. iShares NASDAQ Biotechnology ETF (NASDAQ:IBB)
Market capitalization: US$7.56 billion
The iShares NASDAQ Biotechnology ETF was incepted on February 5, 2001 and tracks 220 holdings. According to its profile, the IBB ETF is a diversified fund in that it provides exposure to biotechnology, life sciences tools and services and pharmaceuticals. Its overarching investment goal is to track companies focused in these areas that trade on the NASDAQ.
While most of the holdings are large-cap biotech stocks—with 52 percent of the biotech stocks on the list falling into this category—mid-cap and small-cap biotech stocks account for 37 percent of the fund. On that note, its top three holdings are: Amgen (NASDAQ:AMGN), weighted at 8.11 percent; Gilead Sciences (NASDAQ:GILD), representing a 7.90 percent weight on the fund; and Celgene (NASDAQ:CELG) holding a 7.22 percent weight on the index.
2. SPDR S&P Biotech ETF (NYSEARCA:XBI)
Market capitalization: US$4.41 billion
Established on February 6, 2006, the SPDR S&P Biotech ETF is largely equal-weighted that focuses mostly on biotech companies with a small mix of pharmaceutical companies. As noted by ETF.com, this ETF’s investment objective is on small and micro-cap companies, which makes the weight of each holding smaller than other ETFs in this sector.
On that note, the SPDR S&P Biotech ETF has 120 holdings in its portfolio, including these top three in the market: Array BioPharma (NASDAQ:ARRY), weighing in at 2.04 percent; Sarepta Therapeutics (NASDAQ:SRPT) holding a 1.71 percent weight; and Invitae (NYSE:NVTA), which has a 1.61 percent weighting on the index.
3. First Trust Amex Biotechnology Index (NYSEARCA:FBT)
Market capitalization: US$2.93 billion
The First Trust Amex Biotechnology Index entered the markets on June 23, 2006 and aims to track as closely as it can the NYSE Arca Biotechnology Index. Companies on this fund are generally involved in areas such as recombinant DNA technology, molecular biology, genetic engineering and genomics.
While companies on this ETF have a niche industry focus and only 31 holdings, this means they are largely equally weighted and that the assets are relatively balanced. Its top three holdings are large cap companies such as: Sarepta Therapeutics at 4.32 percent weighting; Exact Sciences (NASDAQ:EXAS) with a 4.05 percent weight; and IQVIA Holdings (NYSE:IQV) weighing in at 3.89 percent.
4. Direxion Daily S&P Biotech Bull 3x Shares (NYSEARCA:LABU)
Market capitalization: US$594.15 million
Founded on May 28, 2015, the goal of the Direxion Daily S&P Biotech Bull 3x Shares ETF is not your traditional ETF where it mirrors an index. Instead, its goal is to obtain daily investment results of at least 300 percent of the S&P Biotechnology Select Industry Index.
Like other ETFS on this list, companies on the Direxion Daily S&P Biotech Bull 3x Shares ETF have an equally weighted average. Out of 120 holdings, its top three are: Array Biopharma, which has a 2.04 percent weight; Sarepta Therapeutics representing a 1.71 percent weight; and Invitae, which has a 1.62 percent weight on the ETF.
5. ARK Genomic Revolution Multi-Sector ETF (NYSEARCA:ARKG)
Market capitalization: US$442.83 million
Last on our biotechnology ETFs list is the ARK Genomic Revolution Multi-Sector ETF, which came into existence on October 31, 2014 and tracks 37 holdings. Similar to the First Trust Amex Biotechnology Index, this ETF also has a specific industry area of focus. Companies on the list develop products such as: CRISPR technology, bioinformatics, molecular diagnostics and stem cells.
On that note, the top two companies on the ETF have the most weight on the fund—Illumina (NASDAQ:ILMN) at 11.37 percent and Invitae at 10.02 percent—while Intellia Therapeutics (NASDAQ:NTLA) holds third spot with a 6.74 percent weight on the fund.
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This is an updated version of an article first published on the Investing News Network in 2016.
Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.