Three outperforming biotech ETFs offer exposure to the industry as the benchmark Nasdaq Biotechnology Index has rebounded more than 25% from its bear market lows amid successful clinical trials, rising earnings, and takeovers.
They are the First Trust NYSE Arca Biotechnology Index Fund, Invesco Dynamic Biotechnology & Genome ETF, and VanEck Biotech ETF, which have outperformed a key biotech index and also the broader stock market over the last year. These ETFs own companies that focus on areas including biological services, and developing and commercializing products based on genetic engineering and genetic analysis.
- The three top biotech ETFs outperformed a key biotech index and also the broader market over the past year.
- The biotech ETFs with the best one-year trailing total return are the First Trust NYSE Arca Biotechnology Index Fund, the Invesco Dynamic Biotechnology & Genome ETF, and the VanEck Biotech ETF.
- The top holdings of these ETFs are Exact Sciences Corp., Biogen Inc., and Amgen Inc., respectively.
There are 10 biotech ETFs that trade in the United States, excluding inverse and leveraged ETFs as well as funds with less than $50 million in assets under management (AUM).
The three top ETFs in this group have fallen less than the 16% drop in the Nasdaq Biotechnology Index and also less than the 19% decline in the S&P 500 Index in the last year as of Nov. 9. While biotech stocks have been rallying since June, sanctions between China and the U.S. could jeopardize the industry's long-term growth because U.S. companies have collaborated with Chinese companies in areas such as research and new drug development.
We examine the top three biotech ETFs below. All numbers below are as of Nov. 10, 2022.
First Trust NYSE Arca Biotechnology Index Fund (FBT)
- Performance Over One Year: -3.7%
- Expense Ratio: 0.55%
- Annual Dividend Yield: N/A
- Three-Month Average Daily Volume: 39,467
- Assets Under Management: $1.4 billion
- Inception Date: June 19, 2006
- Issuer: First Trust
FBT aims to track the NYSE Arca Biotechnology Index, an equal-dollar-weighted index designed to gauge the performance of biotech companies primarily involved in the use of biological processes such as recombinant DNA technology, molecular biology, genetic engineering, and genomics to develop medicines and therapies.
The fund invests in primarily growth stocks of various market capitalizations. Its top three holdings are Exact Sciences Corp. (EXAS), a molecular diagnostics company specializing in cancers; Moderna Inc. (MRNA), a maker of mRNA vaccines; and IQVIA Holdings Inc. (IQV), an analytics and clinical research services providers.
Invesco Dynamic Biotechnology & Genome ETF (PBE)
- Performance Over One Year: -9.7%
- Expense Ratio: 0.57%
- Annual Dividend Yield: N/A
- Three-Month Average Daily Volume: 9,968
- Assets Under Management: $247.3 million
- Inception Date: June 23, 2005
- Issuer: Invesco
PBE offers exposure to companies that have the potential to achieve technological breakthroughs fueled by increased investment in medical processes. PBE is part of the suite of Dynamic ETFs from PowerShares that use quant-based screening to identify companies.
PBE's top three holdings are Biogen Inc. (BIIB), a maker of therapies for the treatment of neurological diseases; Gilead Sciences Inc. (GILD), a maker of antiviral drugs; and Regeneron Pharmaceuticals Inc. (REGN), a maker of medicines for a variety of serious diseases.
VanEck Biotech ETF (BBH)
- Performance Over One Year: -12.6%
- Expense Ratio: 0.35%
- Annual Dividend Yield: 0.32%
- Three-Month Average Daily Volume: 12,739
- Assets Under Management: $499.5 million
- Inception Date: Dec. 20, 2011
- Issuer: VanEck
BBH tracks the MVIS US Listed Biotech 25 Index, an index of companies that develop, produce, market, and sell drugs based on genetic analysis and diagnostic equipment. The fund holds predominantly large-cap stocks and more than 90% of its holdings are U.S.-based companies.
The top holdings of BBH include Amgen Inc. (AMGN), a biopharmaceutical company focused on neuroscience and cardiovascular diseases; Gilead Sciences, described above; and Vertex Pharmaceuticals Inc. (VRTX), a company developing treatments related to cystic fibrosis.
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