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Is SPDR S&P Biotech ETF (XBI) a Strong ETF Right Now?
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Launched on 01/31/2006, the SPDR S&P Biotech ETF (XBI - 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?
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.
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.
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.
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.
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
Managed by State Street Global Advisors, XBI has amassed assets over $6.45 billion, making it one of the largest ETFs in the Health Care ETFs. XBI seeks to match the performance of the S&P Biotechnology Select Industry Index before fees and expenses.
The S&P Biotechnology Select Industry Index represents the biotechnology sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Biotech Index is a modified equal weight index.
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 this ETF are 0.35%, making it one of the least expensive products in the space.
It's 12-month trailing dividend yield comes in at 0%.
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.
XBI's heaviest allocation is in the Healthcare sector, which is about 100% of the portfolio.
Taking into account individual holdings, Scilex Holding Company accounts for about 1.37% of the fund's total assets, followed by Tg Therapeutics Inc. (TGTX - Free Report) and Viking Therapeutics Inc. (VKTX - Free Report) .
The top 10 holdings account for about 12.3% of total assets under management.
Performance and Risk
Year-to-date, the SPDR S&P Biotech ETF has added about 1.58% so far, and it's up approximately 23.13% over the last 12 months (as of 05/29/2023). XBI has traded between $63.32 and $94.90 in this past 52-week period.
XBI has a beta of 0.97 and standard deviation of 36.84% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 151 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR S&P Biotech 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 iShares Biotechnology ETF (IBB - Free Report) tracks Nasdaq Biotechnology Index. First Trust NYSE Arca Biotechnology ETF has $1.46 billion in assets, iShares Biotechnology ETF has $7.64 billion. FBT has an expense ratio of 0.55% and IBB charges 0.44%.
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 SPDR S&P Biotech ETF (XBI) a Strong ETF Right Now?
Launched on 01/31/2006, the SPDR S&P Biotech ETF (XBI - 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?
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.
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.
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.
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.
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
Managed by State Street Global Advisors, XBI has amassed assets over $6.45 billion, making it one of the largest ETFs in the Health Care ETFs. XBI seeks to match the performance of the S&P Biotechnology Select Industry Index before fees and expenses.
The S&P Biotechnology Select Industry Index represents the biotechnology sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Biotech Index is a modified equal weight index.
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 this ETF are 0.35%, making it one of the least expensive products in the space.
It's 12-month trailing dividend yield comes in at 0%.
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.
XBI's heaviest allocation is in the Healthcare sector, which is about 100% of the portfolio.
Taking into account individual holdings, Scilex Holding Company accounts for about 1.37% of the fund's total assets, followed by Tg Therapeutics Inc. (TGTX - Free Report) and Viking Therapeutics Inc. (VKTX - Free Report) .
The top 10 holdings account for about 12.3% of total assets under management.
Performance and Risk
Year-to-date, the SPDR S&P Biotech ETF has added about 1.58% so far, and it's up approximately 23.13% over the last 12 months (as of 05/29/2023). XBI has traded between $63.32 and $94.90 in this past 52-week period.
XBI has a beta of 0.97 and standard deviation of 36.84% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 151 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR S&P Biotech 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 iShares Biotechnology ETF (IBB - Free Report) tracks Nasdaq Biotechnology Index. First Trust NYSE Arca Biotechnology ETF has $1.46 billion in assets, iShares Biotechnology ETF has $7.64 billion. FBT has an expense ratio of 0.55% and IBB charges 0.44%.
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.