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Is Invesco Dynamic Pharmaceuticals ETF (PJP) a Strong ETF Right Now?
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The Invesco Dynamic Pharmaceuticals ETF (PJP - Free Report) was launched on 06/23/2005, 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?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
Because the fund has amassed over $331.53 million, this makes it one of the average sized ETFs in the Health Care ETFs. PJP is managed by Invesco. 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.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for PJP are 0.58%, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.03%.
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.
PJP's heaviest allocation is in the Healthcare sector, which is about 100% of the portfolio.
When you look at individual holdings, Eli Lilly & Co (LLY - Free Report) accounts for about 5.80% of the fund's total assets, followed by Abbvie Inc (ABBV - Free Report) and Johnson & Johnson (JNJ - Free Report) .
The top 10 holdings account for about 50.89% of total assets under management.
Performance and Risk
The ETF has lost about -7.44% so far this year and is down about -7.50% in the last one year (as of 08/03/2022). In the past 52-week period, it has traded between $69.08 and $83.54.
The ETF has a beta of 0.71 and standard deviation of 21.77% for the trailing three-year period, making it a high risk choice in the space. With about 26 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco Dynamic Pharmaceuticals ETF is a reasonable option for investors seeking to outperform the Health Care ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
IShares U.S. Pharmaceuticals ETF (IHE - Free Report) tracks Dow Jones U.S. Select Pharmaceuticals Index and the VanEck Pharmaceutical ETF (PPH - Free Report) tracks MVIS US Listed Pharmaceutical 25 Index. IShares U.S. Pharmaceuticals ETF has $441.64 million in assets, VanEck Pharmaceutical ETF has $556.52 million. IHE has an expense ratio of 0.42% and PPH 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 Invesco Dynamic Pharmaceuticals ETF (PJP) a Strong ETF Right Now?
The Invesco Dynamic Pharmaceuticals ETF (PJP - Free Report) was launched on 06/23/2005, 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?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
Because the fund has amassed over $331.53 million, this makes it one of the average sized ETFs in the Health Care ETFs. PJP is managed by Invesco. 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.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for PJP are 0.58%, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.03%.
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.
PJP's heaviest allocation is in the Healthcare sector, which is about 100% of the portfolio.
When you look at individual holdings, Eli Lilly & Co (LLY - Free Report) accounts for about 5.80% of the fund's total assets, followed by Abbvie Inc (ABBV - Free Report) and Johnson & Johnson (JNJ - Free Report) .
The top 10 holdings account for about 50.89% of total assets under management.
Performance and Risk
The ETF has lost about -7.44% so far this year and is down about -7.50% in the last one year (as of 08/03/2022). In the past 52-week period, it has traded between $69.08 and $83.54.
The ETF has a beta of 0.71 and standard deviation of 21.77% for the trailing three-year period, making it a high risk choice in the space. With about 26 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco Dynamic Pharmaceuticals ETF is a reasonable option for investors seeking to outperform the Health Care ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
IShares U.S. Pharmaceuticals ETF (IHE - Free Report) tracks Dow Jones U.S. Select Pharmaceuticals Index and the VanEck Pharmaceutical ETF (PPH - Free Report) tracks MVIS US Listed Pharmaceutical 25 Index. IShares U.S. Pharmaceuticals ETF has $441.64 million in assets, VanEck Pharmaceutical ETF has $556.52 million. IHE has an expense ratio of 0.42% and PPH 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.