Investors looking for equities suddenly have more than a few options to consider in this mini-market rally. Whether markets have really priced in Fed action or a possible recession already or not, investors should take a look at healthcare ETFs offering consistency in a strong year for health insurers and pharmaceutical firms.
The likes of Humana (HUM), Merck & Co. (MRK), Eli Lilly and Co. (LLY), Cigna Corp. (CI), and McKesson Corporation (MCK) rose more than 10% in the past month, with all but MRK up by more than 20% over the last six months. A consistent defensive play in complicated markets like ours, healthcare companies also offer growth opportunities from R&D and new drugs coming onto the market like LLY’s recently fast-tracked weight loss treatment.
“Investors are seeking out shares of high-quality companies able to generate consistent earnings amid the economic uncertainty,” said Todd Rosenbluth, head of research at VettaFi. “Many of these reside in the healthcare sector.”
Those looking to add exposure to the space can choose among several healthcare sector ETFs including three that lean towards either pharma or insurance.
Invesco Dynamic Pharmaceuticals ETF (PJP )
PJP holds LLY and MRK at 6.3% and 6% respectively among a slew of other pharmaceutical firms, while tracking the Dynamic Pharmaceuticals Intellidex Index. PJP asks investors to keep up to date on FDA regulations and policies as well as the patent lives of the drugs offered by its component companies, but with its spread of holdings led by LLY and MRK, it represents a notable option.
PJP charges a 58 basis point fee and has returned 7.9% over the last month compared to 6.3% for the ETF Database Category Average, with its one-month return also a near 7% increase over its three-month return.
VanEck Pharmaceutical ETF (PPH )
PPH includes LLY, MRK, and MCK at 9.1%, 6%, and 4.7% respectively, tracking the MVIS US Listed Pharmaceutical 25 Index. PPH also faces the aforementioned pharma risks but with a heavy concentration on the top firms in the space as well as investing only in U.S. stocks.
PPH is offered at a 35 basis point fee, with 7.1% returned over the last month compared to the 6.3% ETF Database Category Average. PPH’s one-month return is also almost 12% higher than its three-month return, offering momentum as markets look to maintain their mini rebound.
iShares U.S. Healthcare Providers ETF (IHF )
IHF is for investors looking at the insurance side of the industry. It holds HUM at 5% and CI at 4.9%. As a more narrowly focused offering, IHF may be an interesting tactical play while the market figures itself out in this small rally, benefitting from the performance of HUM and CI particularly.
IHF tracks the Dow Jones U.S. Select Health Care Providers Index and charges a 39 basis point fee returning 5.7% over one month compared to 4.65% for the Factset Segment Average, also an increase over its three-month return of 1.1%.
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