Pharmaceutical exchange-traded funds (ETFs) offer investors access to a basket of U.S.-based and foreign stocks of drug manufacturers and related companies in a single investment. These companies discover, develop, and produce medications used to cure disease, vaccinate, or alleviate symptoms of illness. Pharmaceutical stocks include Pfizer Inc. (PFE) and Merck & Co. Inc. (MRK), two major drug companies, as well as biotech firms and smaller, fast-growing names. Many of these ETFs are dominated by Chinese companies. Pharmaceutical ETFs allow investors to share in the profits earned across the sector while avoiding the idiosyncratic risks of investing in individual stocks. The industry currently is more attractive to many investors because of the worldwide race among pharmaceutical companies both to develop successful vaccines treat COVID-19, or to distribute COVID-19 vaccines already approved by regulatory agencies.
- The pharmaceutical industry significantly underperformed the broader market over the past year.
- The ETFs with the best 1-year trailing total return are KURE, POTX, and PJP.
- The top holdings of these ETFs are WuXi Biologics (Cayman) Inc., Tilray Inc., and Pfizer Inc., respectively.
The pharmaceutical ETF universe is comprised of 6 ETFs, excluding inverse and leveraged ETFs, as well as those with less than $50 million in assets under management (AUM). The pharmaceutical industry has dramatically underperformed the broader market in the past year. As of May 6, the benchmark S&P Pharmaceuticals Industry Index had 1-year trailing total returns of 14.6% compared with 50.0% for the S&P 500. The best performing pharmaceutical ETF is the KraneShares MSCI All China Health Care Index ETF (KURE). Below, we'll take a look at the top 3 pharmaceutical ETFs as measured by 1-year trailing total returns. Aside from the benchmark and S&P performance figures above, all numbers in this story are as of May 15, 2021.
- 1-Year Trailing Total Returns: 56.3%
- Expense Ratio: 0.65%
- Annual Dividend Yield: N/A
- 3-Month Average Daily Volume: 130,928
- Assets Under Management: $235.3 million
- Inception Date: Jan. 31, 2018
- Issuing Company: CICC
KURE is a large-cap ETF that is focused on pharmaceutical companies within China's healthcare sector. It tracks the MSCI China All Shares Health Care 10/40 Index. The ETF follows a blended strategy, investing in both growth and value stocks, and has about 111 holdings. The ETF's top three holdings include WuXi Biologics (2269:HKG), a pharmaceutical company; class A shares of Shenzhen Mindray Bio-Medical Electronics Co. Ltd. (300760:SHE), a manufacturer and distributor of medical equipment; and class A shares of Jiangsu Hengrui Pharmaceuticals Co. Ltd. (600276:SHE), a pharmaceutical company.
- 1-Year Trailing Total Returns: 53.8%
- Expense Ratio: 0.51%
- Annual Dividend Yield: 4.38%
- 3-Month Average Daily Volume: 495,881
- Assets Under Management: $185.4 million
- Inception Date: Sept. 17, 2019
- Issuing Company: Mirae Asset
POTX is a multi-cap, blended fund that tracks the Cannabis Index. The fund seeks to invest in companies across the cannabis industry, including companies which grow, produce, and distribute cannabis products, as well as companies that provide financial services to the cannabis industry, and others. While POTX does hold traditional pharmaceutical stocks, it includes companies involved in pharmaceutical applications of cannabis. The fund holds about 24 holdings, with just over two thirds of assets concentrated in the 10 largest positions. The top holdings of POTX include Tilray (TLRY), a pharmaceutical cannabis company; OrganiGram Holdings Inc. (OGI:TSE), a producer of medical cannabis products; and Valens Company Inc. (VLNS:TSE), a biotechnology company specializing in cannabis processing and formulation.
- 1-Year Trailing Total Returns: 28.6%
- Expense Ratio: 0.56%
- Annual Dividend Yield: 0.70%
- 3-Month Average Daily Volume: 19,098
- Assets Under Management: $359.4 million
- Inception Date: June 23, 2005
- Issuing Company: Invesco
PJP is a multi-cap fund which targets the Dynamic Pharmaceutical Intellidex Index. The index is comprised of pharmaceutical stocks selected for capital appreciation potential based on factors including price momentum, earnings momentum, quality, management action, and value. The fund has 28 holdings, with about half of invested assets allocated to the top 10 positions. The top holdings for PJP include Pfizer Inc. (PFE), Amgen Inc. (AMGN), and Gilead Sciences Inc. (GILD), all of which are pharmaceutical companies.
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