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

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

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

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 6, placing it in top 38%.

Index Details

The fund is sponsored by Van Eck. It has amassed assets over $479.92 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

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

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 0.48%.

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.

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 12.77% 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 63.86% of total assets under management.

Performance and Risk

The ETF has lost about -3.06% and was up about 2.73% so far this year and in the past one year (as of 05/31/2023), respectively. BBH has traded between $132.48 and $170.13 during this last 52-week period.

The ETF has a beta of 0.85 and standard deviation of 24.42% 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 sports a Zacks ETF Rank of 4 (Sell), which is based on expected asset class return, expense ratio, and momentum, among other factors. BBH, then, is not the best option for investors seeking exposure to the Health Care ETFs segment of the market. However, there are better ETFs in the space to 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 $6.50 billion in assets, iShares Biotechnology ETF has $7.57 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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