If you’re interested in broad exposure to the Healthcare – Pharma segment of the equity market, look no further than the SPDR S&P Pharmaceuticals ETF (XPH), a passively managed exchange traded fund launched on 06/19/2006.
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.
Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Healthcare – Pharma is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 8, placing it in top 50%.
Index Details
The fund is sponsored by State Street Global Advisors. It has amassed assets over $203.45 million, making it one of the average sized ETFs attempting to match the performance of the Healthcare – Pharma segment of the equity market. XPH seeks to match the performance of the S&P Pharmaceuticals Select Industry Index before fees and expenses.
The S&P Pharmaceuticals Select Industry Index represents the pharmaceuticals sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the US common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Pharmaceuticals Index is a modified equal weight index.
Costs
When considering an ETF’s total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 1.21%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund’s holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Healthcare sector–about 100% of the portfolio.
Looking at individual holdings, Organon & Co. (OGN) accounts for about 6.09% of total assets, followed by Jazz Pharmaceuticals Public Limited Company (JAZZ) and Bristol-Myers Squibb Company (BMY).
The top 10 holdings account for about 49.09% of total assets under management.
Performance and Risk
Year-to-date, the SPDR S&P Pharmaceuticals ETF has lost about -2.62% so far, and is down about -6.67% over the last 12 months (as of 04/15/2022). XPH has traded between $41.55 and $53.10 in this past 52-week period.
The ETF has a beta of 0.98 and standard deviation of 25.05% for the trailing three-year period, making it a high risk choice in the space. With about 49 holdings, it has more concentrated exposure than peers.
Alternatives
SPDR S&P Pharmaceuticals ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, XPH is a reasonable option for those seeking exposure to the Health Care ETFs area of the market. Investors might also want to consider some other ETF options in the space.
IShares U.S. Pharmaceuticals ETF (IHE) tracks Dow Jones U.S. Select Pharmaceuticals Index and the VanEck Pharmaceutical ETF (PPH) tracks MVIS US Listed Pharmaceutical 25 Index. IShares U.S. Pharmaceuticals ETF has $414.65 million in assets, VanEck Pharmaceutical ETF has $457.04 million. IHE has an expense ratio of 0.42% and PPH charges 0.35%.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit
Zacks ETF Center
.
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