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Is SPDR S&P Pharmaceuticals ETF (XPH) a Strong ETF Right Now?
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Making its debut on 06/19/2006, smart beta exchange traded fund SPDR S&P Pharmaceuticals ETF (XPH - Free Report) provides investors 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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
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
XPH is managed by State Street Global Advisors, and this fund has amassed over $222.39 million, which makes it one of the average sized ETFs in the Health Care ETFs. 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.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
With one of the least expensive products in the space, this ETF has annual operating expenses of 0.35%.
It has a 12-month trailing dividend yield of 1.59%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
For XPH, it has heaviest allocation in the Healthcare sector --about 100% of the portfolio.
When you look at individual holdings, Axsome Therapeutics Inc. (AXSM - Free Report) accounts for about 8.46% of the fund's total assets, followed by Nektar Therapeutics (NKTR - Free Report) and Corcept Therapeutics Incorporated. (CORT - Free Report) .
The top 10 holdings account for about 40.01% of total assets under management.
Performance and Risk
The ETF has lost about -8.09% so far this year and is down about -15.43% in the last one year (as of 11/11/2022). In the past 52-week period, it has traded between $38.15 and $50.72.
XPH has a beta of 0.85 and standard deviation of 25.91% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 43 holdings, it has more concentrated exposure than peers.
Alternatives
SPDR S&P 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 $417.01 million in assets, VanEck Pharmaceutical ETF has $553.36 million. IHE has an expense ratio of 0.39% 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 SPDR S&P Pharmaceuticals ETF (XPH) a Strong ETF Right Now?
Making its debut on 06/19/2006, smart beta exchange traded fund SPDR S&P Pharmaceuticals ETF (XPH - Free Report) provides investors 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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
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
XPH is managed by State Street Global Advisors, and this fund has amassed over $222.39 million, which makes it one of the average sized ETFs in the Health Care ETFs. 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.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
With one of the least expensive products in the space, this ETF has annual operating expenses of 0.35%.
It has a 12-month trailing dividend yield of 1.59%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
For XPH, it has heaviest allocation in the Healthcare sector --about 100% of the portfolio.
When you look at individual holdings, Axsome Therapeutics Inc. (AXSM - Free Report) accounts for about 8.46% of the fund's total assets, followed by Nektar Therapeutics (NKTR - Free Report) and Corcept Therapeutics Incorporated. (CORT - Free Report) .
The top 10 holdings account for about 40.01% of total assets under management.
Performance and Risk
The ETF has lost about -8.09% so far this year and is down about -15.43% in the last one year (as of 11/11/2022). In the past 52-week period, it has traded between $38.15 and $50.72.
XPH has a beta of 0.85 and standard deviation of 25.91% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 43 holdings, it has more concentrated exposure than peers.
Alternatives
SPDR S&P 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 $417.01 million in assets, VanEck Pharmaceutical ETF has $553.36 million. IHE has an expense ratio of 0.39% 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.