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Should You Invest in the VanEck Biotech ETF (BBH)?

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The VanEck Biotech ETF (BBH - Free Report) was launched on 12/20/2011, and is a passively managed exchange traded fund designed to offer broad exposure to the Healthcare - Biotech segment of the equity market.

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Healthcare - Biotech is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 2, placing it in top 13%.

Index Details

The fund is sponsored by Van Eck. It has amassed assets over $512.46 million, making it one of the average sized ETFs attempting to match the performance of the Healthcare - Biotech segment of the equity market. BBH seeks to match the performance of the MVIS US Listed Biotech 25 Index before fees and expenses.

The MVIS US Listed Biotech 25 Index tracks the overall performance of companies involved in the development and production, marketing and sales of drugs based on genetic analysis and diagnostic equipment.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 0.24%.

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, Amgen Inc (AMGN - Free Report) accounts for about 13.09% of total assets, followed by Gilead Sciences Inc (GILD - Free Report) and Vertex Pharmaceuticals Inc (VRTX - Free Report) .

The top 10 holdings account for about 63.49% of total assets under management.

Performance and Risk

The ETF has lost about -11.36% so far this year and is down about -14.29% in the last one year (as of 11/22/2022). In that past 52-week period, it has traded between $132.48 and $198.48.

The ETF has a beta of 0.84 and standard deviation of 27.66% for the trailing three-year period, making it a high risk choice in the space. With about 26 holdings, it has more concentrated exposure than peers.

Alternatives

VanEck Biotech ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, BBH 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.

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 $7.85 billion in assets, iShares Biotechnology ETF has $8.87 billion. XBI has an expense ratio of 0.35% and IBB charges 0.44%.

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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