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Is iShares Biotechnology ETF (IBB) a Strong ETF Right Now?
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Designed to provide broad exposure to the Health Care ETFs category of the market, the iShares Biotechnology ETF (IBB - Free Report) is a smart beta exchange traded fund launched on 02/05/2001.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well 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.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is sponsored by Blackrock. It has amassed assets over $8.81 billion, making it one of the largest ETFs in the Health Care ETFs. Before fees and expenses, IBB seeks to match the performance of the Nasdaq Biotechnology Index.
The ICE Biotechnology Index contains securities of NASDAQ listed companies that are classified as either biotechnology or pharmaceuticals.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Operating expenses on an annual basis are 0.44% for this ETF, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.26%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
IBB's heaviest allocation is in the Healthcare sector, which is about 100% of the portfolio.
Taking into account individual holdings, Vertex Pharmaceuticals Inc (VRTX - Free Report) accounts for about 7.06% of the fund's total assets, followed by Gilead Sciences Inc (GILD - Free Report) and Amgen Inc (AMGN - Free Report) .
Performance and Risk
The ETF has lost about -11.41% so far this year and is down about -12.32% in the last one year (as of 11/15/2022). In the past 52-week period, it has traded between $105.82 and $156.06.
The fund has a beta of 0.84 and standard deviation of 28.36% for the trailing three-year period, which makes IBB a high risk choice in this particular space. With about 375 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 $1.42 billion in assets, SPDR S&P Biotech ETF has $7.56 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?
Designed to provide broad exposure to the Health Care ETFs category of the market, the iShares Biotechnology ETF (IBB - Free Report) is a smart beta exchange traded fund launched on 02/05/2001.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well 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.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is sponsored by Blackrock. It has amassed assets over $8.81 billion, making it one of the largest ETFs in the Health Care ETFs. Before fees and expenses, IBB seeks to match the performance of the Nasdaq Biotechnology Index.
The ICE Biotechnology Index contains securities of NASDAQ listed companies that are classified as either biotechnology or pharmaceuticals.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Operating expenses on an annual basis are 0.44% for this ETF, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.26%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
IBB's heaviest allocation is in the Healthcare sector, which is about 100% of the portfolio.
Taking into account individual holdings, Vertex Pharmaceuticals Inc (VRTX - Free Report) accounts for about 7.06% of the fund's total assets, followed by Gilead Sciences Inc (GILD - Free Report) and Amgen Inc (AMGN - Free Report) .
Performance and Risk
The ETF has lost about -11.41% so far this year and is down about -12.32% in the last one year (as of 11/15/2022). In the past 52-week period, it has traded between $105.82 and $156.06.
The fund has a beta of 0.84 and standard deviation of 28.36% for the trailing three-year period, which makes IBB a high risk choice in this particular space. With about 375 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 $1.42 billion in assets, SPDR S&P Biotech ETF has $7.56 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.