If you're interested in broad exposure to the Healthcare - Pharma segment of the equity market, look no further than the iShares U.S. Pharmaceuticals ETF (
IHE Quick Quote IHE - Free Report) , a passively managed exchange traded fund launched on 05/01/2006.
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.
Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Healthcare - Pharma is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 4, placing it in top 25%.
The fund is sponsored by Blackrock. It has amassed assets over $439.16 million, making it one of the average sized ETFs attempting to match the performance of the Healthcare - Pharma segment of the equity market. IHE seeks to match the performance of the Dow Jones U.S. Select Pharmaceuticals Index before fees and expenses.
The Dow Jones U.S. Select Pharmaceuticals Index is free-float adjusted market capitalization-weighted index. It includes pharmaceutical companies such as manufacturers of prescription or over-the-counter drugs or vaccines, but excludes producers of vitamins.
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 0.42%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.61%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, 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, Johnson & Johnson (
JNJ Quick Quote JNJ - Free Report) accounts for about 22.80% of total assets, followed by Pfizer Inc ( PFE Quick Quote PFE - Free Report) and Bristol Myers Squibb ( BMY Quick Quote BMY - Free Report) .
The top 10 holdings account for about 79.18% of total assets under management.
Performance and Risk
Year-to-date, the iShares U.S. Pharmaceuticals ETF has lost about -0.67% so far, and it's up approximately 5.89% over the last 12 months (as of 07/11/2022). IHE has traded between $178.46 and $201.82 in this past 52-week period.
The ETF has a beta of 0.77 and standard deviation of 20.64% 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.
IShares U.S. 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, IHE 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.
Invesco Dynamic Pharmaceuticals ETF (
PJP Quick Quote PJP - Free Report) tracks Dynamic Pharmaceutical Intellidex Index and the VanEck Pharmaceutical ETF ( PPH Quick Quote PPH - Free Report) tracks MVIS US Listed Pharmaceutical 25 Index. Invesco Dynamic Pharmaceuticals ETF has $323.70 million in assets, VanEck Pharmaceutical ETF has $589.35 million. PJP has an expense ratio of 0.58% and PPH charges 0.35%. Bottom Line
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Zacks ETF Center.