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Is Invesco Dynamic Pharmaceuticals ETF (PJP) a Strong ETF Right Now?
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A smart beta exchange traded fund, the Invesco Dynamic Pharmaceuticals ETF (PJP - Free Report) debuted on 06/23/2005, and offers broad exposure to the Health Care ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the 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.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination 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
Because the fund has amassed over $315.46 million, this makes it one of the average sized ETFs in the Health Care ETFs. PJP is managed by Invesco. Before fees and expenses, this particular fund seeks to match the performance of the Dynamic Pharmaceutical Intellidex Index.
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
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 cousins, other things remaining the same.
Annual operating expenses for this ETF are 0.58%, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.94%.
Sector Exposure and Top Holdings
ETFs offer 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.
For PJP, it has heaviest allocation in the Healthcare sector --about 100% of the portfolio.
When you look at individual holdings, Eli Lilly & Co (LLY - Free Report) accounts for about 5.81% of the fund's total assets, followed by Amgen Inc (AMGN - Free Report) and Johnson & Johnson (JNJ - Free Report) .
Its top 10 holdings account for approximately 51.06% of PJP's total assets under management.
Performance and Risk
So far this year, PJP has lost about -6.94%, and is down about -2.32% in the last one year (as of 06/02/2022). During this past 52-week period, the fund has traded between $70.83 and $83.54.
PJP has a beta of 0.79 and standard deviation of 21.44% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 27 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco Dynamic 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.
IShares U.S. Pharmaceuticals ETF (IHE - Free Report) tracks Dow Jones U.S. Select Pharmaceuticals Index and the VanEck Pharmaceutical ETF (PPH - Free Report) tracks MVIS US Listed Pharmaceutical 25 Index. IShares U.S. Pharmaceuticals ETF has $414.54 million in assets, VanEck Pharmaceutical ETF has $478.49 million. IHE has an expense ratio of 0.42% and PPH 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 Invesco Dynamic Pharmaceuticals ETF (PJP) a Strong ETF Right Now?
A smart beta exchange traded fund, the Invesco Dynamic Pharmaceuticals ETF (PJP - Free Report) debuted on 06/23/2005, and offers broad exposure to the Health Care ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the 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.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination 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
Because the fund has amassed over $315.46 million, this makes it one of the average sized ETFs in the Health Care ETFs. PJP is managed by Invesco. Before fees and expenses, this particular fund seeks to match the performance of the Dynamic Pharmaceutical Intellidex Index.
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
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 cousins, other things remaining the same.
Annual operating expenses for this ETF are 0.58%, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.94%.
Sector Exposure and Top Holdings
ETFs offer 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.
For PJP, it has heaviest allocation in the Healthcare sector --about 100% of the portfolio.
When you look at individual holdings, Eli Lilly & Co (LLY - Free Report) accounts for about 5.81% of the fund's total assets, followed by Amgen Inc (AMGN - Free Report) and Johnson & Johnson (JNJ - Free Report) .
Its top 10 holdings account for approximately 51.06% of PJP's total assets under management.
Performance and Risk
So far this year, PJP has lost about -6.94%, and is down about -2.32% in the last one year (as of 06/02/2022). During this past 52-week period, the fund has traded between $70.83 and $83.54.
PJP has a beta of 0.79 and standard deviation of 21.44% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 27 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco Dynamic 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.
IShares U.S. Pharmaceuticals ETF (IHE - Free Report) tracks Dow Jones U.S. Select Pharmaceuticals Index and the VanEck Pharmaceutical ETF (PPH - Free Report) tracks MVIS US Listed Pharmaceutical 25 Index. IShares U.S. Pharmaceuticals ETF has $414.54 million in assets, VanEck Pharmaceutical ETF has $478.49 million. IHE has an expense ratio of 0.42% and PPH 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.