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Is iShares Biotechnology ETF (IBB) a Strong ETF Right Now?
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Designed to provide broad exposure to the Health Care ETFs category of the market, the iShares Biotechnology ETF (IBB - Free Report) is a smart beta exchange traded fund launched on 02/05/2001.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Managed by Blackrock, IBB has amassed assets over $8.14 billion, making it one of the largest ETFs in the Health Care ETFs. Before fees and expenses, IBB seeks to match the performance of the Nasdaq Biotechnology Index.
The ICE Biotechnology Index contains securities of NASDAQ listed companies that are classified as either biotechnology or pharmaceuticals.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.45% for IBB, making it on par with most peer products in the space.
IBB's 12-month trailing dividend yield is 0.25%.
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.
This ETF has heaviest allocation in the Healthcare sector - about 100% of the portfolio.
When you look at individual holdings, Amgen Inc (AMGN - Free Report) accounts for about 11.27% of the fund's total assets, followed by Gilead Sciences Inc (GILD - Free Report) and Regeneron Pharmaceuticals Inc (REGN - Free Report) .
IBB's top 10 holdings account for about 51.38% of its total assets under management.
Performance and Risk
The ETF has lost about -18.85% so far this year and is down about -23.83% in the last one year (as of 07/13/2022). In the past 52-week period, it has traded between $105.82 and $176.21.
IBB has a beta of 0.86 and standard deviation of 27.42% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 379 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares Biotechnology ETF is an excellent option for investors seeking to outperform the Health Care ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
First Trust NYSE Arca Biotechnology ETF (FBT - Free Report) tracks NYSE Arca Biotechnology Index and the SPDR S&P Biotech ETF (XBI - Free Report) tracks S&P Biotechnology Select Industry Index. First Trust NYSE Arca Biotechnology ETF has $1.35 billion in assets, SPDR S&P Biotech ETF has $7.53 billion. FBT has an expense ratio of 0.55% and XBI 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 iShares Biotechnology ETF (IBB) a Strong ETF Right Now?
Designed to provide broad exposure to the Health Care ETFs category of the market, the iShares Biotechnology ETF (IBB - Free Report) is a smart beta exchange traded fund launched on 02/05/2001.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Managed by Blackrock, IBB has amassed assets over $8.14 billion, making it one of the largest ETFs in the Health Care ETFs. Before fees and expenses, IBB seeks to match the performance of the Nasdaq Biotechnology Index.
The ICE Biotechnology Index contains securities of NASDAQ listed companies that are classified as either biotechnology or pharmaceuticals.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.45% for IBB, making it on par with most peer products in the space.
IBB's 12-month trailing dividend yield is 0.25%.
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.
This ETF has heaviest allocation in the Healthcare sector - about 100% of the portfolio.
When you look at individual holdings, Amgen Inc (AMGN - Free Report) accounts for about 11.27% of the fund's total assets, followed by Gilead Sciences Inc (GILD - Free Report) and Regeneron Pharmaceuticals Inc (REGN - Free Report) .
IBB's top 10 holdings account for about 51.38% of its total assets under management.
Performance and Risk
The ETF has lost about -18.85% so far this year and is down about -23.83% in the last one year (as of 07/13/2022). In the past 52-week period, it has traded between $105.82 and $176.21.
IBB has a beta of 0.86 and standard deviation of 27.42% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 379 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares Biotechnology ETF is an excellent option for investors seeking to outperform the Health Care ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
First Trust NYSE Arca Biotechnology ETF (FBT - Free Report) tracks NYSE Arca Biotechnology Index and the SPDR S&P Biotech ETF (XBI - Free Report) tracks S&P Biotechnology Select Industry Index. First Trust NYSE Arca Biotechnology ETF has $1.35 billion in assets, SPDR S&P Biotech ETF has $7.53 billion. FBT has an expense ratio of 0.55% and XBI 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.