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Is iShares Biotechnology ETF (IBB) a Strong ETF Right Now?
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Launched on 02/05/2001, the iShares Biotechnology ETF (IBB - Free Report) is a smart beta exchange traded fund offering broad exposure to the Health Care ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
A good option for investors who believe in market efficiency, market cap weighted indexes offer 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.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by Blackrock. IBB has been able to amass assets over $8.13 billion, making it one of the largest ETFs in the Health Care ETFs. This particular fund seeks to match the performance of the Nasdaq Biotechnology Index before fees and expenses.
The ICE Biotechnology Index contains securities of NASDAQ listed companies that are classified as either biotechnology or pharmaceuticals.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Annual operating expenses for IBB are 0.44%, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 0.24%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
For IBB, it has heaviest allocation in the Healthcare sector --about 100% of the portfolio.
Taking into account individual holdings, Vertex Pharmaceuticals Inc (VRTX - Free Report) accounts for about 7.60% of the fund's total assets, followed by Gilead Sciences Inc (GILD - Free Report) and Amgen Inc (AMGN - Free Report) .
The top 10 holdings account for about 50.28% of total assets under management.
Performance and Risk
The ETF has lost about -15.63% and is down about -25.98% so far this year and in the past one year (as of 09/12/2022), respectively. IBB has traded between $105.82 and $173.92 during this last 52-week period.
IBB has a beta of 0.85 and standard deviation of 27.73% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 377 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 $1.38 billion in assets, SPDR S&P Biotech ETF has $7.77 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?
Launched on 02/05/2001, the iShares Biotechnology ETF (IBB - Free Report) is a smart beta exchange traded fund offering broad exposure to the Health Care ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
A good option for investors who believe in market efficiency, market cap weighted indexes offer 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.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by Blackrock. IBB has been able to amass assets over $8.13 billion, making it one of the largest ETFs in the Health Care ETFs. This particular fund seeks to match the performance of the Nasdaq Biotechnology Index before fees and expenses.
The ICE Biotechnology Index contains securities of NASDAQ listed companies that are classified as either biotechnology or pharmaceuticals.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Annual operating expenses for IBB are 0.44%, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 0.24%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
For IBB, it has heaviest allocation in the Healthcare sector --about 100% of the portfolio.
Taking into account individual holdings, Vertex Pharmaceuticals Inc (VRTX - Free Report) accounts for about 7.60% of the fund's total assets, followed by Gilead Sciences Inc (GILD - Free Report) and Amgen Inc (AMGN - Free Report) .
The top 10 holdings account for about 50.28% of total assets under management.
Performance and Risk
The ETF has lost about -15.63% and is down about -25.98% so far this year and in the past one year (as of 09/12/2022), respectively. IBB has traded between $105.82 and $173.92 during this last 52-week period.
IBB has a beta of 0.85 and standard deviation of 27.73% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 377 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 $1.38 billion in assets, SPDR S&P Biotech ETF has $7.77 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.