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Should You Invest in the iShares U.S. Medical Devices ETF (IHI)?

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Launched on 05/01/2006, the iShares U.S. Medical Devices ETF (IHI - Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Healthcare - Medical Devices segment of the equity market.

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 - Medical Devices is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 13, placing it in bottom 19%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $7.56 billion, making it one of the largest ETFs attempting to match the performance of the Healthcare - Medical Devices segment of the equity market. IHI seeks to match the performance of the Dow Jones U.S. Select Medical Equipment Index before fees and expenses.

The Dow Jones U.S. Select Medical Equipment Index measures the performance of the medical equipment sector of the U.S. equity market.

Costs

Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.

Annual operating expenses for this ETF are 0.41%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.29%.

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, Thermo Fisher Scientific Inc (TMO - Free Report) accounts for about 14.07% of total assets, followed by Abbott Laboratories (ABT - Free Report) and Danaher Corp (DHR - Free Report) .

The top 10 holdings account for about 63.18% of total assets under management.

Performance and Risk

The ETF has lost about -13.81% so far this year and is up roughly 6.75% in the last one year (as of 03/09/2022). In that past 52-week period, it has traded between $53.60 and $67.15.

The ETF has a beta of 0.87 and standard deviation of 23.26% for the trailing three-year period, making it a medium risk choice in the space. With about 71 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares U.S. Medical Devices ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, IHI is an excellent option for investors seeking exposure to the Health Care ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

First Trust Indxx Medical Devices ETF (MDEV - Free Report) tracks INDXX GLOBAL MEDICAL EQUIPMENT INDEX and the SPDR S&P Health Care Equipment ETF (XHE - Free Report) tracks S&P Health Care Equipment Select Industry Index. First Trust Indxx Medical Devices ETF has $2.10 million in assets, SPDR S&P Health Care Equipment ETF has $512.13 million. MDEV has an expense ratio of 0.70% and XHE charges 0.35%.

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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