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Is iShares Biotechnology ETF (IBB) a Strong ETF Right Now?
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A smart beta exchange traded fund, the iShares Biotechnology ETF (IBB - Free Report) debuted on 02/05/2001, and offers 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.
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.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
Managed by Blackrock, IBB has amassed assets over $10.56 billion, making it one of the largest ETFs in the Health Care ETFs. IBB, before fees and expenses, seeks to match the performance of the Nasdaq Biotechnology Index.
The NASDAQ Biotechnology Index contains securities of NASDAQ listed companies that are classified as either biotechnology or pharmaceuticals.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Operating expenses on an annual basis are 0.45% for this ETF, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.21%.
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.
For IBB, it has heaviest allocation in the Healthcare sector --about 99.80% of the portfolio.
Taking into account individual holdings, Amgen Inc (AMGN - Free Report) accounts for about 7.74% of the fund's total assets, followed by Gilead Sciences Inc (GILD - Free Report) and Moderna Inc (MRNA - Free Report) .
Its top 10 holdings account for approximately 46.17% of IBB's total assets under management.
Performance and Risk
The ETF has added roughly 9.68% and is up about 24.44% so far this year and in the past one year (as of 11/04/2021), respectively. IBB has traded between $137.63 and $176.21 during this last 52-week period.
IBB has a beta of 0.87 and standard deviation of 26.09% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 277 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 $1.84 billion in assets, SPDR S&P Biotech ETF has $7.69 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?
A smart beta exchange traded fund, the iShares Biotechnology ETF (IBB - Free Report) debuted on 02/05/2001, and offers 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.
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.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
Managed by Blackrock, IBB has amassed assets over $10.56 billion, making it one of the largest ETFs in the Health Care ETFs. IBB, before fees and expenses, seeks to match the performance of the Nasdaq Biotechnology Index.
The NASDAQ Biotechnology Index contains securities of NASDAQ listed companies that are classified as either biotechnology or pharmaceuticals.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Operating expenses on an annual basis are 0.45% for this ETF, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.21%.
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.
For IBB, it has heaviest allocation in the Healthcare sector --about 99.80% of the portfolio.
Taking into account individual holdings, Amgen Inc (AMGN - Free Report) accounts for about 7.74% of the fund's total assets, followed by Gilead Sciences Inc (GILD - Free Report) and Moderna Inc (MRNA - Free Report) .
Its top 10 holdings account for approximately 46.17% of IBB's total assets under management.
Performance and Risk
The ETF has added roughly 9.68% and is up about 24.44% so far this year and in the past one year (as of 11/04/2021), respectively. IBB has traded between $137.63 and $176.21 during this last 52-week period.
IBB has a beta of 0.87 and standard deviation of 26.09% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 277 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 $1.84 billion in assets, SPDR S&P Biotech ETF has $7.69 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.