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Is SPDR S&P Biotech ETF (XBI) a Strong ETF Right Now?
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Designed to provide broad exposure to the Health Care ETFs category of the market, the SPDR S&P Biotech ETF (XBI - Free Report) is a smart beta exchange traded fund launched on 01/31/2006.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
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.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $7.96 billion, this makes it one of the largest ETFs in the Health Care ETFs. XBI is managed by State Street Global Advisors. Before fees and expenses, this particular fund seeks to match the performance of the S&P Biotechnology Select Industry Index.
The S&P Biotechnology Select Industry Index represents the biotechnology sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Biotech Index is a modified equal weight index.
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.
Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.
XBI's 12-month trailing dividend yield is 0%.
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.
This ETF has heaviest allocation in the Healthcare sector - about 100% of the portfolio.
Looking at individual holdings, Global Blood Therapeutics Inc accounts for about 2.65% of total assets, followed by Karuna Therapeutics Inc. and Chemocentryx Inc. .
Its top 10 holdings account for approximately 16.78% of XBI's total assets under management.
Performance and Risk
The ETF has lost about -29.86% so far this year and is down about -32.12% in the last one year (as of 11/23/2022). In the past 52-week period, it has traded between $62.81 and $120.05.
The ETF has a beta of 1.01 and standard deviation of 39.81% for the trailing three-year period, making it a high risk choice in the space. With about 135 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR S&P Biotech 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 iShares Biotechnology ETF (IBB - Free Report) tracks Nasdaq Biotechnology Index. First Trust NYSE Arca Biotechnology ETF has $1.42 billion in assets, iShares Biotechnology ETF has $8.93 billion. FBT has an expense ratio of 0.55% and IBB charges 0.44%.
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 Biotech ETF (XBI) a Strong ETF Right Now?
Designed to provide broad exposure to the Health Care ETFs category of the market, the SPDR S&P Biotech ETF (XBI - Free Report) is a smart beta exchange traded fund launched on 01/31/2006.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
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.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $7.96 billion, this makes it one of the largest ETFs in the Health Care ETFs. XBI is managed by State Street Global Advisors. Before fees and expenses, this particular fund seeks to match the performance of the S&P Biotechnology Select Industry Index.
The S&P Biotechnology Select Industry Index represents the biotechnology sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Biotech Index is a modified equal weight index.
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.
Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.
XBI's 12-month trailing dividend yield is 0%.
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.
This ETF has heaviest allocation in the Healthcare sector - about 100% of the portfolio.
Looking at individual holdings, Global Blood Therapeutics Inc accounts for about 2.65% of total assets, followed by Karuna Therapeutics Inc. and Chemocentryx Inc. .
Its top 10 holdings account for approximately 16.78% of XBI's total assets under management.
Performance and Risk
The ETF has lost about -29.86% so far this year and is down about -32.12% in the last one year (as of 11/23/2022). In the past 52-week period, it has traded between $62.81 and $120.05.
The ETF has a beta of 1.01 and standard deviation of 39.81% for the trailing three-year period, making it a high risk choice in the space. With about 135 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR S&P Biotech 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 iShares Biotechnology ETF (IBB - Free Report) tracks Nasdaq Biotechnology Index. First Trust NYSE Arca Biotechnology ETF has $1.42 billion in assets, iShares Biotechnology ETF has $8.93 billion. FBT has an expense ratio of 0.55% and IBB charges 0.44%.
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.