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Is Invesco Dynamic Biotechnology & Genome ETF (PBE) a Strong ETF Right Now?

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Designed to provide broad exposure to the Health Care ETFs category of the market, the Invesco Dynamic Biotechnology & Genome ETF (PBE - Free Report) is a smart beta exchange traded fund launched on 06/23/2005.

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.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

The fund is managed by Invesco, and has been able to amass over $239.87 million, which makes it one of the average sized ETFs in the Health Care ETFs. Before fees and expenses, PBE seeks to match the performance of the Dynamic Biotechnology & Genome Intellidex Index.

The Dynamic Biotech & Genome Intellidex Index seeks to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including price momentum, earnings momentum, quality, management action, and value.

Cost & Other Expenses

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for PBE are 0.59%, which makes it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 0%.

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, Catalent Inc (CTLT - Free Report) accounts for about 5.31% of total assets, followed by Vertex Pharmaceuticals Inc (VRTX - Free Report) and Biogen Inc (BIIB - Free Report) .

The top 10 holdings account for about 44.93% of total assets under management.

Performance and Risk

The ETF has lost about -15.62% so far this year and is down about -19.49% in the last one year (as of 07/26/2022). In the past 52-week period, it has traded between $52.10 and $79.80.

PBE has a beta of 0.94 and standard deviation of 29.73% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 31 holdings, it has more concentrated exposure than peers.

Alternatives

Invesco Dynamic Biotechnology & Genome 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.

SPDR S&P Biotech ETF (XBI - Free Report) tracks S&P Biotechnology Select Industry Index and the iShares Biotechnology ETF (IBB - Free Report) tracks Nasdaq Biotechnology Index. SPDR S&P Biotech ETF has $7.73 billion in assets, iShares Biotechnology ETF has $7.97 billion. XBI has an expense ratio of 0.35% and IBB charges 0.45%.

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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