Designed to provide broad exposure to the Healthcare - Broad segment of the equity market, the Health Care Select Sector SPDR ETF (
XLV Quick Quote XLV - Free Report) is a passively managed exchange traded fund launched on 12/16/1998.
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 are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Healthcare - Broad 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 $37.69 billion, making it the largest ETF attempting to match the performance of the Healthcare - Broad segment of the equity market. XLV seeks to match the performance of the Health Care Select Sector Index before fees and expenses.
The Health Care Select Sector Index includes companies from the following industries: pharmaceuticals; health care providers & services; health care equipment & supplies; biotechnology; life sciences tools & services; and health care technology.
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 0.10%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 1.48%.
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.
This ETF has heaviest allocation in the Healthcare sector--about 100% of the portfolio.
Looking at individual holdings, Unitedhealth Group Incorporated (
UNH Quick Quote UNH - Free Report) accounts for about 9.12% of total assets, followed by Johnson & Johnson ( JNJ Quick Quote JNJ - Free Report) and Pfizer Inc. ( PFE Quick Quote PFE - Free Report) .
The top 10 holdings account for about 51.68% of total assets under management.
Performance and Risk
The ETF has lost about -6.33% so far this year and was up about 3.57% in the last one year (as of 07/04/2022). In that past 52-week period, it has traded between $119.89 and $142.83.
The ETF has a beta of 0.75 and standard deviation of 21.15% for the trailing three-year period, making it a medium risk choice in the space. With about 68 holdings, it effectively diversifies company-specific risk.
Health Care Select Sector SPDR ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, XLV 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.
IShares Global Healthcare ETF (
IXJ Quick Quote IXJ - Free Report) tracks S&P Global 1200 Healthcare Sector Index and the Vanguard Health Care ETF ( VHT Quick Quote VHT - Free Report) tracks MSCI US Investable Market Health Care 25/50 Index. IShares Global Healthcare ETF has $3.58 billion in assets, Vanguard Health Care ETF has $15.64 billion. IXJ has an expense ratio of 0.43% and VHT charges 0.10%. Bottom Line
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Zacks ETF Center.