Healthcare exchange-traded funds (ETFs) invest in a basket of stocks of companies that provide medical services, develop medical equipment or drugs, offer medical insurance, or facilitate the provision of healthcare to patients. Some notable companies in the healthcare sector include UnitedHealth Group Inc. (UNH), Pfizer Inc. (PFE), and Merck & Co. Inc. (MRK). Because the majority of healthcare services and products are often seen as necessities, as opposed to discretionary purchases, the healthcare industry is considered non-cyclical. This can make healthcare ETFs a strong position in a defensive portfolio.
- The healthcare sector underperformed the broader market over the past year.
- The ETFs with the best 1-year trailing total return are ARKG, PTH, and KURE.
- The top holdings of these ETFs are Invitae Corp., Novavax Inc., and WuXi Biologics Inc., respectively.
The healthcare ETF universe is comprised of about 33 distinct ETFs that trade in the U.S., excluding inverse and leveraged ETFs, as well as funds with less than $50 million in assets under management (AUM). As of October 29, 2020, the healthcare sector, as measured by the Health Care Select Sector SPDR ETF (XLV), has underperformed the broader market with a total return of 7.8% over the past 12 months compared to the S&P 500's total return of 11.1%. The best-performing healthcare ETF, based on performance over the past year, is the ARK Genomic Revolution ETF (ARKG). We examine the top 3 healthcare ETFs below. All figures are as of October 29, 2020, except for the top holdings, which are as of November 10, 2020.
- Performance over 1-Year: 126.6%
- Expense Ratio: 0.75%
- Annual Dividend Yield: 3.21%
- 3-Month Average Daily Volume: 942,682
- Assets Under Management: $2.9 billion
- Inception Date: October 31, 2014
- Issuer: ARK Investment Management
An actively-managed multi-cap fund, ARKG seeks to add value by identifying companies most likely to profit from the latest scientific advances. Examples of areas in which the company has invested include stem cell research, gene editing, genetic therapy, and molecular diagnostics. The fund is largely focused on growth stocks in the U.S. biotechnology sector, and its three largest holdings are Invitae Corp. (NVTA), a genetics information supplier to the medical industry; CRISPR Therapeutics AG (CRSP), a Switzerland-based developer and maker of gene-based medicines; and Pacific Biosciences of California Inc. (PACB), a designer and manufacturer of genetic sequencing technologies.
- Performance over 1-Year: 69.3%
- Expense Ratio: 0.60%
- Annual Dividend Yield: N/A
- 3-Month Average Daily Volume: 48,080
- Assets Under Management: $543.6 million
- Inception Date: October 12, 2006
- Issuer: Invesco
PTH is a multi-cap ETF focused on growth stocks in the U.S. healthcare sector. It tracks the Dynamic Healthcare Sector Intellidex Index, which is comprised of U.S. healthcare equities and seeks to provide capital appreciation by using quant-based filters to choose individual stocks. The fund tends to appeal to investors looking for a short-term tactical portfolio adjustment or as part of a sector rotation approach. The fund's top three holdings include Amedisys Inc. (AMED), a health care services provider; Danaher Corp. (DHR), a manufacturer of laboratory testing equipment; and Thermo Fisher Scientific Inc. (TMO), a manufacturer and provider of laboratory equipment, software, and services.
- Performance over 1-Year: 48.1%
- Expense Ratio: 0.65%
- Annual Dividend Yield: 0.16%
- 3-Month Average Daily Volume: 65,727
- Assets Under Management: $133.8 million
- Inception Date: February 1, 2018
- Issuer: KraneShares
KURE is an ETF that focuses on stocks in China's healthcare sector. It tracks the MSCI China All Shares Health Care 10/40 Index, a free-float-adjusted index that is market-cap weighted. The fund invests in a mixture of companies ranging from small-cap to large-cap firms. Its top three holdings are WuXi Biologics (Cayman) Inc. (2269:HKG), a China-based developer of pharmaceutical products; Jiangsu Hengrui Medicine Co. Ltd. (600276:SHG), a China-based pharmaceutical company; and Shenzhen Mindray Bio-Medical Electronics Co. Ltd. (300760:SHE), a China-based manufacturer of medical equipment.
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