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Should You Invest in the Invesco Dynamic Pharmaceuticals ETF (PJP)?

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Designed to provide broad exposure to the Healthcare - Pharma segment of the equity market, the Invesco Dynamic Pharmaceuticals ETF (PJP - Free Report) is a passively managed exchange traded fund launched on 06/23/2005.

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

Additionally, sector ETFs offer convenient 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 10, placing it in bottom 38%.

Index Details

The fund is sponsored by Invesco. It has amassed assets over $435.01 million, making it one of the average sized ETFs attempting to match the performance of the Healthcare - Pharma segment of the equity market. PJP seeks to match the performance of the Dynamic Pharmaceutical Intellidex Index before fees and expenses.

The Dynamic Pharmaceutical Intellidex Index is comprised of stocks of U.S. pharmaceutical companies. It is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including fundamental growth, stock valuation, investment timeliness and risk factors.

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 0.58%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.82%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, 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, Merck & Co Inc (MRK - Free Report) accounts for about 6.99% of total assets, followed by Abbott Laboratories (ABT - Free Report) and Eli Lilly & Co (LLY - Free Report) .

The top 10 holdings account for about 57.16% of total assets under management.

Performance and Risk

Year-to-date, the Invesco Dynamic Pharmaceuticals ETF has lost about -0.83% so far, and was up about 12.97% over the last 12 months (as of 01/05/2022). PJP has traded between $73.23 and $83.17 in this past 52-week period.

The ETF has a beta of 0.82 and standard deviation of 21.25% for the trailing three-year period, making it a high risk choice in the space. With about 23 holdings, it has more concentrated exposure than peers.

Alternatives

Invesco Dynamic 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, PJP is a sufficient 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.

VanEck Pharmaceutical ETF (PPH - Free Report) tracks MVIS US Listed Pharmaceutical 25 Index and the iShares U.S. Pharmaceuticals ETF (IHE - Free Report) tracks Dow Jones U.S. Select Pharmaceuticals Index. VanEck Pharmaceutical ETF has $368.76 million in assets, iShares U.S. Pharmaceuticals ETF has $400.55 million. PPH has an expense ratio of 0.35% and IHE charges 0.42%.

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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