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Is iShares Biotechnology ETF (IBB) a Strong ETF Right Now?
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The iShares Biotechnology ETF (IBB - Free Report) was launched on 02/05/2001, and is a smart beta exchange traded fund designed to offer broad exposure to the Health Care ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
IBB is managed by Blackrock, and this fund has amassed over $7.89 billion, which makes it one of the largest ETFs in the Health Care ETFs. IBB seeks to match the performance of the Nasdaq Biotechnology Index before fees and expenses.
The ICE Biotechnology Index contains securities of NASDAQ listed companies that are classified as either biotechnology or pharmaceuticals.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.45% for IBB, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 0.26%.
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.
Representing 99.90% of the portfolio, the fund has heaviest allocation to the Healthcare sector.
Looking at individual holdings, Amgen Inc (AMGN - Free Report) accounts for about 7.95% of total assets, followed by Moderna Inc (MRNA - Free Report) and Gilead Sciences Inc (GILD - Free Report) .
IBB's top 10 holdings account for about 38.57% of its total assets under management.
Performance and Risk
The ETF has lost about -19.56% so far this year and is down about -16.48% in the last one year (as of 03/07/2022). In the past 52-week period, it has traded between $121.50 and $176.21.
IBB has a beta of 0.90 and standard deviation of 25.96% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 270 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares Biotechnology ETF is an excellent option for investors seeking to outperform the Health Care ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
First Trust NYSE Arca Biotechnology ETF (FBT - Free Report) tracks NYSE Arca Biotechnology Index and the SPDR S&P Biotech ETF (XBI - Free Report) tracks S&P Biotechnology Select Industry Index. First Trust NYSE Arca Biotechnology ETF has $1.46 billion in assets, SPDR S&P Biotech ETF has $6.37 billion. FBT has an expense ratio of 0.55% and XBI charges 0.35%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Health Care ETFs.
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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Is iShares Biotechnology ETF (IBB) a Strong ETF Right Now?
The iShares Biotechnology ETF (IBB - Free Report) was launched on 02/05/2001, and is a smart beta exchange traded fund designed to offer broad exposure to the Health Care ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
IBB is managed by Blackrock, and this fund has amassed over $7.89 billion, which makes it one of the largest ETFs in the Health Care ETFs. IBB seeks to match the performance of the Nasdaq Biotechnology Index before fees and expenses.
The ICE Biotechnology Index contains securities of NASDAQ listed companies that are classified as either biotechnology or pharmaceuticals.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.45% for IBB, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 0.26%.
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.
Representing 99.90% of the portfolio, the fund has heaviest allocation to the Healthcare sector.
Looking at individual holdings, Amgen Inc (AMGN - Free Report) accounts for about 7.95% of total assets, followed by Moderna Inc (MRNA - Free Report) and Gilead Sciences Inc (GILD - Free Report) .
IBB's top 10 holdings account for about 38.57% of its total assets under management.
Performance and Risk
The ETF has lost about -19.56% so far this year and is down about -16.48% in the last one year (as of 03/07/2022). In the past 52-week period, it has traded between $121.50 and $176.21.
IBB has a beta of 0.90 and standard deviation of 25.96% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 270 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares Biotechnology ETF is an excellent option for investors seeking to outperform the Health Care ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
First Trust NYSE Arca Biotechnology ETF (FBT - Free Report) tracks NYSE Arca Biotechnology Index and the SPDR S&P Biotech ETF (XBI - Free Report) tracks S&P Biotechnology Select Industry Index. First Trust NYSE Arca Biotechnology ETF has $1.46 billion in assets, SPDR S&P Biotech ETF has $6.37 billion. FBT has an expense ratio of 0.55% and XBI charges 0.35%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Health Care ETFs.
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.