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Is Invesco Pharmaceuticals ETF (PJP) a Strong ETF Right Now?
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The Invesco 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?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
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.
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
The fund is sponsored by Invesco. It has amassed assets over $274.80 million, making it one of the average sized ETFs in the Health Care ETFs. This particular fund 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
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 0.57% for PJP, making it on par with most peer products in the space.
PJP's 12-month trailing dividend yield is 1%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Healthcare sector - about 100% of the portfolio.
Taking into account individual holdings, Abbvie Inc (ABBV - Free Report) accounts for about 5.90% of the fund's total assets, followed by Abbott Laboratories (ABT - Free Report) and Amgen Inc (AMGN - Free Report) .
The top 10 holdings account for about 51.64% of total assets under management.
Performance and Risk
Year-to-date, the Invesco Pharmaceuticals ETF has gained about 1.39% so far, and is down about -0.44% over the last 12 months (as of 02/20/2024). PJP has traded between $67.88 and $80 in this past 52-week period.
PJP has a beta of 0.60 and standard deviation of 15.79% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 25 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco 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.
VanEck Pharmaceutical ETF (PPH - Free Report) tracks MVIS US Listed Pharmaceutical 25 Index and the iShares U.S. Pharmaceuticals ETF (IHE - Free Report) tracks Dow Jones U.S. Select Pharmaceuticals Index. VanEck Pharmaceutical ETF has $516.24 million in assets, iShares U.S. Pharmaceuticals ETF has $693.12 million. PPH has an expense ratio of 0.36% and IHE charges 0.40%.
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 Pharmaceuticals ETF (PJP) a Strong ETF Right Now?
The Invesco 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?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
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.
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
The fund is sponsored by Invesco. It has amassed assets over $274.80 million, making it one of the average sized ETFs in the Health Care ETFs. This particular fund 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
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 0.57% for PJP, making it on par with most peer products in the space.
PJP's 12-month trailing dividend yield is 1%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Healthcare sector - about 100% of the portfolio.
Taking into account individual holdings, Abbvie Inc (ABBV - Free Report) accounts for about 5.90% of the fund's total assets, followed by Abbott Laboratories (ABT - Free Report) and Amgen Inc (AMGN - Free Report) .
The top 10 holdings account for about 51.64% of total assets under management.
Performance and Risk
Year-to-date, the Invesco Pharmaceuticals ETF has gained about 1.39% so far, and is down about -0.44% over the last 12 months (as of 02/20/2024). PJP has traded between $67.88 and $80 in this past 52-week period.
PJP has a beta of 0.60 and standard deviation of 15.79% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 25 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco 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.
VanEck Pharmaceutical ETF (PPH - Free Report) tracks MVIS US Listed Pharmaceutical 25 Index and the iShares U.S. Pharmaceuticals ETF (IHE - Free Report) tracks Dow Jones U.S. Select Pharmaceuticals Index. VanEck Pharmaceutical ETF has $516.24 million in assets, iShares U.S. Pharmaceuticals ETF has $693.12 million. PPH has an expense ratio of 0.36% and IHE charges 0.40%.
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.