Medical Device ETFs: An Overview

What are ETFs and why are they particularly important in this market?

medical device etfs

Exchange traded funds (ETFs) contain a variety of companies under one stock trading in the market, this opens the doors for investors to keep track of companies raising the ranks or stick with some of the top holders in the group.

Besides extensive research and analysts quotes, a safer way to invest is through ETF’s, which can reduce risks of investing by providing a larger pool of companies to balance the hits one may take. Instead of going all in for one company, an ETF lets investors pick an interesting area for them and not suffer financially if a company underperforms. ETF’s let investors enter a market confidently and with steady returns.

ETFs can be a less intimidating way of breaking into the stock market since, through their multiple holdings, they provide immediate diversification to buyers.

Medical Device ETFs focus on companies that go through great lengths to develop technology that can improve the life of patients.

What is an ETF?

Exchange-traded funds are defined as similar to mutual funds, which are trading like any other regular stock. These focus on an area in the market and opens the possibility for investors to get a sense for new emerging companies or the consistently top gainers for the ETF.

Hits in the industry don’t translate equally to an ETF, it provides the safety of many other companies and their stability, so when one company fails a trial or gets denied by the FDA, that does not translate to massive losses.

Lower Risks with ETFs

The FDA’s rigorous vetting system makes it so less than subpar products don’t make it to the market. Even if a company follows every step of the approval process right and even if their research indicates their device will benefit patients, the FDA may still find it unfit and cause the company’s stock tumbling down.

With the inherent risk of medical device investing, ETFs provide a more secure space for investors. ETFs bundle together a bunch of securities, often across a certain sector, which is then traded as a unit. Their biggest selling feature, as mentioned, is their in-built diversification, which minimizes risk.

Medical device ETFs to consider

The number of medical device ETFs is slim with only two, but as ETF.com notes, they are vastly different in market exposure. Here’s a brief look at those ETFs.

iShares US Medical Devices ETF (NYSEARCA:IHI)

As ETF.com states, the iShares US Medical Device ETF was launched in 2006 and currently holds 50 big name company stocks, including:

  • Medtronic PLC (NYSE:MDT) works with various technologies to improve health care services for patients, with products available in approximately 160 countries.
  • Abbott Laboratories (NYSE:ABT) offers healthcare products as well, with a variety of clinical test systems for patients, with devices available for diabetes and eye care.
  • Thermo Fisher Scientific (NYSE:TMO) makes some devices for experts, such as laboratory equipment and has products in a variety of areas like cellular analysis, synthetic biology, and molecular biology, amongst others.
  • Danaher Corp (NYSE:DHR) develops research tools for scientists and analytical instruments in the life science market.

SPDR S&P Health Care Equipment ETF (NYSEARCA:XHE)

By contrast, the SPDDR S&P Health Care Equipment ETF is much smaller. While it launched in 2011, it’s struggled to gain significant ground as its sister ETF. That said, some of the top holdings for this ETF include:

  • Alere (NYSE:ALR) provides health information through diagnostic tests, designed for medical professionals and laboratories.
  • Globus Medical (NYSE:GMED) is focused on developing products for patients with musculoskeletal and spine disorders.
  • Align Technology (NASDAQ:ALGN) offers devices for the dentistry industry like scanners and computer-aided digital services.
  • Varex Imaging (NASDAQ:VREX). is a supplier of medical X-ray tubes and image processing solutions.

This article is an updated version of an article originally published on the Investing News Network on September 29, 2016.  This article has been updated as of April 20, 2017 by Bryan Mc Govern.

Don’t forget to follow us @INN_LifeScience for real-time news updates.

Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.

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Comments
  • Elias A.

    There is a third ETF that you might consider adding to your list: “IMED” PureFunds ETFx HealthTech ETF

    Reply

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