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, CNBS, and YOLO.
- The top holdings of these ETFs are Teladoc Health Inc., sponsored ADRS of GW Pharmaceuticals PLC, and Village Farms International Inc., respectively.
The healthcare ETF universe is comprised of about 40 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 February 8, 2021, the healthcare sector, as measured by the S&P 500 Health Care Sector Index, has underperformed the broader market with a total return of 14.5% over the past 12 months compared to the S&P 500's total return of 19.8%. The best 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 below are as of February 9.
- Performance over 1-Year: 225.8%
- Expense Ratio: 0.75%
- Annual Dividend Yield: 0.73%
- 3-Month Average Daily Volume: 4,543,848
- Assets Under Management: $11.6 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 Teladoc Health Inc. (TDOC), a telemedicine and virtual health company; Pacific Biosciences of California Inc. (PACB), a designer and manufacturer of genetic sequencing technologies; and Twist Bioscience Corp. (TWST), a company that manufactures synthetic DNA for the biotechnology industry.
- Performance over 1-Year: 155.0%
- Expense Ratio: 0.75%
- Annual Dividend Yield: 0.35%
- 3-Month Average Daily Volume: 123,797
- Assets Under Management: $73.0 million
- Inception Date: July 23, 2019
- Issuer: Amplify
CNBS seeks to provide investors with exposure to the global cannabis industry. At least 80% of its holdings are invested in companies that generate 50% or more of their revenue from cannabis and hemp production, and related products and services. The ETF invests in a basket of equities across the market-cap spectrum, from micro-cap to large-cap stocks, and includes exposure to companies focused on medical cannabis and therapeutics. About 16% of its assets represent the pharmaceuticals/biotechnology segment of the marijuana industry. The fund invests in both growth and value stocks. Its top three holdings include sponsored ADRs of GW Pharmaceuticals PLC (GWPH), a British pharmaceuticals company; Aphria Inc. (APHA:TSE), a Canadian producer of medicinal and recreational cannabis products; and Canopy Growth Corp. (WEED:TSE), a producer of medical cannabis.
- Performance over 1-Year: 150.8%
- Expense Ratio: 0.75%
- Annual Dividend Yield: 1.33%
- 3-Month Average Daily Volume: 475,025
- Assets Under Management: $335.8 million
- Inception Date: April 17, 2019
- Issuer: AdvisorShares
YOLO is an actively managed fund and aims to provide long-term capital appreciation by investing in cannabis equity securities. It holds stocks of both domestic and foreign companies, but is primarily focused on those located in the U.S. and Canada. Like CNBS above, YOLO includes companies focused on therapeutics and medicinal cannabis in its portfolio. The ETF follows a blended strategy, investing in both value and growth stocks with various market capitalizations. The fund's top three equity holdings include Village Farms International Inc. (VFF:TSE), a company that operates agricultural greenhouse facilities and raises various produce; sponsored ADRs of GW Pharmaceuticals; and Aphria.
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