Back to top

Image: Bigstock

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

Read MoreHide Full Article

A smart beta exchange traded fund, the Invesco Biotechnology & Genome ETF (PBE - Free Report) debuted on 06/23/2005, and offers broad exposure to the Health Care ETFs category of the market.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

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.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

Because the fund has amassed over $208.41 million, this makes it one of the average sized ETFs in the Health Care ETFs. PBE is managed by Invesco. PBE seeks to match the performance of the Dynamic Biotechnology & Genome Intellidex Index before fees and expenses.

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.

With on par with most peer products in the space, this ETF has annual operating expenses of 0.57%.

It has a 12-month trailing dividend yield of 0.03%.

Sector Exposure and Top Holdings

ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

Representing 100% of the portfolio, the fund has heaviest allocation to the Healthcare sector.

When you look at individual holdings, Amgen Inc (AMGN - Free Report) accounts for about 5.68% of the fund's total assets, followed by Vertex Pharmaceuticals Inc (VRTX - Free Report) and Biogen Inc (BIIB - Free Report) .

Its top 10 holdings account for approximately 48.64% of PBE's total assets under management.

Performance and Risk

The ETF has lost about -16.59% so far this year and is down about -17.34% in the last one year (as of 10/31/2023). In the past 52-week period, it has traded between $52.52 and $68.03.

PBE has a beta of 0.86 and standard deviation of 25.33% 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 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 $5.02 billion in assets, iShares Biotechnology ETF has $6.35 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.

Published in