If you're interested in broad exposure to the Healthcare - Pharma segment of the equity market, look no further than the SPDR S&P Pharmaceuticals ETF (
XPH Quick Quote XPH - Free Report) , a passively managed exchange traded fund launched on 06/19/2006.
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Healthcare - Pharma is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 7, placing it in top 44%.
The fund is sponsored by State Street Global Advisors. It has amassed assets over $205.67 million, making it one of the average sized ETFs attempting to match the performance of the Healthcare - Pharma segment of the equity market. XPH seeks to match the performance of the S&P Pharmaceuticals Select Industry Index before fees and expenses.
The S&P Pharmaceuticals Select Industry Index represents the pharmaceuticals sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the US common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Pharmaceuticals Index is a modified equal weight index.
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 1%.
Sector Exposure and Top Holdings
ETFs offer a 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, Merck & Co. Inc. (
MRK Quick Quote MRK - Free Report) accounts for about 5.24% of total assets, followed by Organon & Co. ( OGN Quick Quote OGN - Free Report) and Perrigo Co. Plc ( PRGO Quick Quote PRGO - Free Report) .
The top 10 holdings account for about 45.84% of total assets under management.
Performance and Risk
The ETF has lost about -6.11% so far this year and is down about -18.42% in the last one year (as of 02/08/2022). In that past 52-week period, it has traded between $41.55 and $56.01.
The ETF has a beta of 1 and standard deviation of 24.71% for the trailing three-year period, making it a high risk choice in the space. With about 49 holdings, it has more concentrated exposure than peers.
SPDR S&P Pharmaceuticals ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, XPH is a sufficient option for those seeking exposure to the Health Care ETFs area of the market. Investors might also want to consider some other ETF options in the space.
IShares U.S. Pharmaceuticals ETF (
IHE Quick Quote IHE - Free Report) tracks Dow Jones U.S. Select Pharmaceuticals Index and the VanEck Pharmaceutical ETF ( PPH Quick Quote PPH - Free Report) tracks MVIS US Listed Pharmaceutical 25 Index. IShares U.S. Pharmaceuticals ETF has $391.47 million in assets, VanEck Pharmaceutical ETF has $392.75 million. IHE has an expense ratio of 0.42% and PPH charges 0.35%. Bottom Line
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Zacks ETF Center.