Experienced and novice investors alike may want to consider pharmaceutical exchange-traded funds (ETFs) as a way to stay informed about what companies are leading the industry.
Pharma ETFs are key for investors who want to trade in a set of assets instead of individual companies.
For novice investors, ETFs are composed of numerous companies in a specified industry. Advantages of ETF investments include gaining exposure to an overarching sector but still being able to trade it like a stock, less market volatility and lower fees and expenses.
The pharma ETFs on this list have a broad portfolio of pharma companies in their holdings. Pharmaceutical ETFs give investors a broad view of what these companies have to offer and where they stand in the market.
To help investors become more aware of what some of their options are when looking at investing in the pharmaceutical sector, the Investing News Network (INN) is looking at the five top ETFs (barring any leveraged ETFs) in the space, according to ETF Database. Included on the list are:
- Invesco Dynamic Pharmaceuticals ETF (NYSEARCA:PJP)
- iShares US Pharmaceuticals ETF (NYSEARCA:IHE)
- SPDR S&P Pharmaceuticals ETF (NYSEARCA:XPH)
- VanEck Vectors Pharmaceutical ETF (NASDAQ:PPH)
- KraneShares MSCI All China Health Care Index ETF (NYSEARCA:KURE)
The funds are arranged by the value of their assets. Here’s a closer look at these top pharmaceutical ETFs.
1. Invesco Dynamic Pharmaceuticals ETF
The Invesco Dynamic Pharmaceuticals ETF is primarily focused on giving investors exposure to US-based pharmaceutical companies. Its analyst report says that this ETF chooses the individual securities on certain investment criteria, namely stock valuation and risk factors. Notably, it claims that investing in pharmaceutical companies can be risky due to US Food and Drug Administration (FDA) regulations and the “rigorous testing” required before a product hits the market.
This ETF was started on June 23, 2005, and currently tracks 30 holdings. The top holdings this fund tracks are pharma giants such as Johnson & Johnson (NYSE:JNJ), Abbott Laboratories (NYSE:ABT), Merck (NYSE:MRK), Pfizer (NYSE:PFE) and Eli Lilly and Co. (NYSE:LLY), all weighing close to or over five percent each.
2. iShares US Pharmaceuticals ETF
Created on May 5, 2006, the iShares US Pharmaceuticals ETF also tracks some of the top US pharma companies. In total, this ETF tracks 45 holdings with a market cap breakdown of 64 percent being large cap, 20 percent mid cap and 15 percent divided between micro cap and small cap.
Its top holdings include Johnson & Johnson and Pfizer, each with over 20 percent weighting, Elanco Animal Health (NYSE:ELAN) with over five percent weightage, Zoetis (NYSE:ZTS) with a 4.65 percent weightage and Merck with a 4.28 percent weightage.
3. SPDR S&P Pharmaceuticals ETF
The SPDR S&P Pharmaceuticals ETF came into the markets on June 19, 2006, and represents the pharmaceutical sub-industry sector of the S&P Total Markets Index. The ETF’s analyst report suggests that, due to its narrow focus — which includes pharma giants that post “big returns” during times of consolidation — it should not be considered for a long-term investment portfolio.
While this pharma ETF tracks 41 holdings, the fund’s top five ones all hover around the five percent mark, including Zoetis, Elanco Animal Heath, Perrigo Company (NYSE:PRGO), Jazz Pharmaceuticals (NASDAQ:JAZZ) and Johnson & Johnson.
4. VanEck Vectors Pharmaceutical ETF
Established in late 2011, the VanEck Vectors Pharmaceutical ETF tracks the MVIS US Listed Pharmaceutical 25 Index and has the capacity to provide big returns, even though there are some risks attached to the ETF. Its analyst report indicates investors looking for “tactical exposure” to the pharma sector might consider this ETF as an investment option.
On this ETF are a slightly smaller 25 holdings, including top holdings such as McKesson (NYSE:MCK), Johnson & Johnson, AbbVie (NYSE:ABBV), GlaxoSmithKline (NYSE:GSK), Pfizer and Zoetis, all with over five percent weighting each.
5. KraneShares MSCI All China Health Care Index ETF
The KraneShares MSCI All China Health Care Index ETF, begun on February 1, 2018, represents a market of pharmaceutical companies based in China. According to KraneShare, China has the fastest growing healthcare market in the world.
This index tracks the most companies out of all the other ETFs at 59 holdings. Rounding out the fund’s top five holdings are Jiangsu Hengrui Medicine (SHA:600276), CSPC Pharmaceutical Group (HKG:1093), Sino Biopharmaceutical (HKG:1177), Wuxi Biologics Cayman (HKG:2269) and SinoPharm Group (HKG:1099).
This is an updated version of an article originally published by the Investing News Network in 2016.
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Securities Disclosure: I, Jocelyn Aspa, hold no investment interest in any of the companies mentioned.