A wide range of investors may want to consider pharmaceutical ETFs as a way to stay informed about and invest in leaders in the industry.
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 a set of assets instead of individual companies.
ETFs are composed of numerous companies in a specified industry. The advantages of ETF investments include the fact that they provide exposure to an overarching sector but still trade like a stock. They also offer less market volatility and lower fees and expenses.
The pharma ETFs on the list below have broad portfolios 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 is looking at the five top ETFs (barring any leveraged ETFs) in the space, according to ETFdb.com. Included on the list are:
- Invesco Dynamic Pharmaceuticals ETF (ARCA:PJP)
- iShares US Pharmaceuticals ETF (ARCA:IHE)
- SPDR S&P Pharmaceuticals ETF (ARCA:XPH)
- VanEck Vectors Pharmaceutical ETF (NASDAQ:PPH)
- KraneShares MSCI All China Health Care Index ETF (ARCA:KURE)
The funds are arranged by the value of their assets. Here’s a closer look at these pharmaceutical ETFs.
1. Invesco Dynamic Pharmaceuticals ETF
The Invesco Dynamic Pharmaceuticals ETF is primarily focused on giving investors exposure to US-based pharmaceutical companies. An analyst report says that this ETF chooses individual securities based 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. Its top holdings are pharma giants such as Johnson & Johnson (NYSE:JNJ), Abbott Laboratories (NYSE:ABT), Merck (NYSE:MRK), Pfizer (NYSE:PFE) and Eli Lilly and Company (NYSE:LLY), all weighing in at close to or over 5 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 64 percent being large cap-stocks, 20 percent being mid-cap stocks and 15 percent being divided between micro-cap and small-cap stocks.
Its top holdings include Johnson & Johnson and Pfizer, each with weighings of over 20 percent, Elanco Animal Health (NYSE:ELAN) with over 5 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. An analyst report for the ETF 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 all hover around the 5 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. An analyst report indicates that investors looking for “tactical exposure” to the pharma sector might consider this ETF as an investment option.
Included in this ETF are a slightly smaller 25 constituents, including top holdings such as McKesson (NYSE:MCK), Johnson & Johnson, AbbVie (NYSE:ABBV), GlaxoSmithKline (NYSE:GSK), Pfizer and Zoetis, all with weightings of over 5 percent 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 KraneShares, China has the fastest growing healthcare market in the world.
This fund tracks the most companies out of all the other ETFs on this list at 59. In the fund’s top five holdings are Jiangsu Hengrui Medicine (SHA:600276), CSPC Pharmaceutical Group (HKEX: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.