The healthcare sector has been an investor favorite in times of alarming global trade crisis given its defensive tilt and non-cyclical nature. There has been a sense of panic across the world in the past few weeks on a widespread decline in emerging market currencies. The U.S. dollar strengthened on a strong economy.  Investors were in a fix with all the tension relating to rising interest rates and U.S.-China trade war.  This led to heightened scale of investments in the safe haven of healthcare in the past week (see all Health Care ETFs here).

 

Per Bank of America Merrill Lynch, about $3.6 billion was pulled out from equity mutual funds and ETFs, of which $2.6 billion was U.S. equities, as quoted on CNBC. On the other hand, Health care securities attracted $800 million leading the sector inflows to $5.5 billion in the past three months (read: Health Care ETFs Outperforming: Will the Rally Last?).

 

Healthcare services are enjoying an increase in demand with the ageing population and ever-mounting problem of obesity. These companies are high on cash. Investors should note that the U.S. health care supply chain is consolidating fast.  Global M&A activity hit a 17-year-high-record in the first quarter of 2018 on jumbo U.S. health care deals. The U.S. health services industry recorded more than 200 deals for 15 consecutive quarters, per a report by PricewaterhouseCoopers. 

 

Overall, the sector attracted a large amount of funds in the last three months. Health Care Select Sector SPDR Fund (XLV Quick QuoteXLV - Free Report) , the top-most health care ETF in terms of the total assets under management of nearly $18 billion, has grown 11.4% year to date versus the S&P 500 index’s 6.9% rise. The fund has amassed about $1.03 billion in the past three months (read: 8 ETFs Up More Than 25% YTD).

 

Below we highlight the Healthcare ETFs outperforming XLV as of Aug 23, 2018.

 

Invesco S&P SmallCap Health Care ETF (PSCH Quick QuotePSCH - Free Report) -- Up 43% YTD

 

This fund tracks the S&P SmallCap 600 Health Care Index.  The fund has AUM of $1.07 billion and an expense ratio of 0.29%. There are 80 holdings in the basket and the top position is held by Ligand Pharmaceuticals (LGND Quick QuoteLGND - Free Report) (4.97%). The fund trades at an average of 82000 shares daily. It has a Zacks ETF Rank #1 (Strong Buy) with a High risk outlook.

 

SPDR S&P Health Care Equipment ETF (XHE Quick QuoteXHE - Free Report) -- Up 31% YTD

 

This fund tracks the S&P Health Care Equipment Select Industry Index. It has AUM of $646.7 million and an expense ratio of 0.35%. The fund has 71 holdings, with Tandem Diabetes Care, Inc (TNDM Quick QuoteTNDM - Free Report) occupying the top position with 3.70% weight. The daily traded volume is 67,833 shares. It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

 

iShares U.S. Medical Devices ETF (IHI Quick QuoteIHI - Free Report) -- Up 23.4% YTD

 

This fund tracks the Dow Jones U.S. Select Medical Equipment Index. It has AUM of $2.78 billion and an expense ratio of 0.43%. There are 55 holdings in the basket and MEDTRONIC PLC (MDT Quick QuoteMDT - Free Report) occupies the first position with 8.88% weight. The fund trades at a daily average of 115000 shares. It has a Zacks ETF Rank #1 and a Medium risk outlook.

 

First Trust Amex Biotechnology Index (FBT Quick QuoteFBT - Free Report) -- Up 21.8% YTD

 

This fund tracks the NYSE Arca Biotechnology Index. It has AUM of $2.22 billion and an expense ratio of 0.56%. The fund has a pool of 31 funds with Nektar Therapeutics (NKTR Quick QuoteNKTR - Free Report) holding the top weight of 4.25%. The fund trades at a daily average of 87000 shares. It has a Zacks ETF Rank #2 (Buy) with a High risk outlook. 

 

iShares U.S. Healthcare Providers ETF (IHF Quick QuoteIHF - Free Report) -- Up 23.8% YTD

 

The fund tracks the Dow Jones U.S. Select Health Care Providers Index. It has AUM of $872.5 million and an expense ratio of 0.43%. There are 46 holdings with the top weight allotted to UNITEDHEALTH GROUP INC (UNH Quick QuoteUNH - Free Report) . The fund trades at a daily average of nearly 52000 shares. It has a Zacks ETF Rank #2 and a Medium risk outlook.

 

 

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