For those looking to avoid volatility, these biotechnology ETFs may an option for investors.
Investing in biotechnology companies can be a long road to make gains, even with a good understanding of the system no one can predict what treatment, device, or therapy will give investors the biggest return. Exchange Traded Funds (ETFs) are a route some investors choose to minimize loss and benefit from the profit of (often) hundreds of companies—instead of focusing on the gain and loss of a single company.
ETFs tend to be a more stable investment than the smaller-cap stocks that lead volatility. With this in mind, here’s a brief look at five biotechnology ETFs and their holdings.
Data was collected from the ETF Database, with all numbers and figures are current as of 3:30 p.m. EST on February 6, 2018.
1. iShares NASDAQ Biotechnology ETF (NASDAQ:IBB)
This ETF has served as one of the best exposures into the healthcare industry with a variety of companies listed working in wide range of medical services and devices. The ETF Database describes IBB as “somewhat top-heavy” however it does spread exposure over smaller companies.
Despite the big names included atop the list of holdings in IBB, this ETF has 83.27 percent of its assets in the top 50 of its listings—a category low for the concentration analysis. What this means is a huge percentage of its flow comes from middle to small companies making up the 50 first companies.
There are a total of 197 holdings listed in IBB, it’s top 10 holdings include some of the biggest names in the Life Science sector: Gilead Sciences (NASDAQ:GILD) an 8.22 percent of the total weight in the ETF, Biogen (NASDAQ:BIIB) represents 8.03 percent taking, Amgen (NASDAQ:AMGN) with 8.01 percent, and Celgene (NASDAQ:CELG) weight amounts to 7.45 percent.
2018 has only seen small gains so far this year with only a 0.38 percent increase, but on a one-year basis it has increased by 13.95 percent.
2. SPDR S&P Biotech ETF (ARCA:XBI)
Thanks to its strong portfolio in the medical landscape, XBI is capable of seeing big spikes thanks to approvals and positive tests. ETF.com wrote XBI is a “highly efficient fund, which charges less than competing funds, has a history of beating its index due to revenue from securities lending.”
There are 109 holdings in this ETF, with small cap companies averaging 35 percent of the total weight of the listings. Bioverativ (NASDAQ:BIVV) represents 2.80 percent of the total ETF weight, Juno Therapeutics (NASDAQ:JUNO) totaling 2.02 percent, MiMedxGroup (NASDAQ:MDXG) amounting to 1.90 percent and Array Biopharma (NASDAQ:ARRY) representing 1.80 percent.
So far in 2018, XBI has gone up by 4.09 percent.
3. First Trust NYSE ARCA Biotechnology Index Fund (ARCA:FBT)
With a goal of tracking the NYSE ARCA Biotechnology index as closely as possible, the second on our biotechnology ETFs list was introduced in 2006. The fund is rebalanced quarterly in January, April, July, and October.
There are only 31 holdings in this ETF, but thanks to its focus on smaller cap companies rather than blockbuster ones, its long term play is a valuable option for investors. The top holdings of this ETF areBioverativ (NASDAQ:BIVV) which weighs 5.19 percent of the total ETF, Juno Therapeutics (NASDAQ:JUNO) amounting to 4.03 percent, Nektar Therapeutics (NASDAQ:NKTR) totaling 3.92 percent and FibroGen (NASDAQ:FGEN) representing 3.72 percent weight in the ETF.
FBT is composed of mostly American stocks focused on a specific sector of the healthcare market, with a wider range of mid and smaller tier companies. Over a one-year period, FBT has increased by 36.57 percent, with a year-to-date high of 6.87 percent.
4. VanEck Vectors Biotech ETF (NASDAQ:BBH)
“This ETF is probably most useful for those seeking tactical exposure to this corner of the market; the underlying holdings are generally found in broad-based equity ETFs, so there should be little appeal to buy-and-holders,” wrote ETF.com.
With only 26 holdings, and 68.68 percent of assets in the top 10, BBH has a good range of large to small cap companies. The larger cap companies are weighted much higher than the smaller, but it’s only more noticeable because it has less holdings overall. This isn’t necessarily a negative, as the weighting frequently changes. The top holding is Amgen (NASDAQ:AMGN) weighing 12.23 percent, Gilead Sciences (NASDAQ:GILD) at 11.51 percent, Celgene (NASDAQ:CELG) at 8.57 percent and Biogen (NASDAQ:BIIB) representing 7.10 percent.
In terms of its performance, the one year return was only 5.24 percent. Year-to-date, the ETF has slipped slightly by 2.50 percent, but still has a 113.06 increase return over the five years.
5. ProShares Ultra Nasdaq Biotechnology (NASDAQ:BIB)
Different from the other ETFs mentioned so far, BIB offers “2x daily long leverage to the broad-based NASDAQ Biotechnology Index” wrote ETF.com. In short, this makes it a good tool for investors with a short-term outlook.
This ETF has a fair share of holdings—197 to be exact—and a good amount of those highly weighted on BIB are large cap companies at the top of the other ETF’s such as IBB and XBI. BIB’s assets are relatively equal with 86.41 percent weight in the top 50. For the top holdings, at the top is Gilead Sciences (NASDAQ:GILD) weighing 8.53 percent, then Biogen (NASDAQ:BIIB) at 8.33 percent, Amgen (NASDAQ:AMGN) with 8.31 percent, and Celgene (NASDAQ:CELG) close by at 7.73 percent.
BIB had a one year return of 24.51 percent, and a 0.20 percent year-to-date increase.
Don’t forget to follow us @INN_LifeScience for real-time news updates!
This is an updated version of an article first published on the Investing News Network in 2016.
Securities Disclosure: I, Gabrielle Lakusta, hold no direct investment interest in any company mentioned in this article.