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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.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
XBI is managed by State Street Global Advisors, and this fund has amassed over $6.84 billion, which makes 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
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for XBI are 0.35%, which makes 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
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that 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, Mirati Therapeutics Inc accounts for about 2.16% of the fund's total assets, followed by Immunovant Inc (IMVT - Free Report) and Apellis Pharmaceuticals Inc (APLS - Free Report) .
The top 10 holdings account for about 15.82% of total assets under management.
Performance and Risk
Year-to-date, the SPDR S&P Biotech ETF has added roughly 3.28% so far, and was up about 6.24% over the last 12 months (as of 12/18/2023). XBI has traded between $64.12 and $91.97 in this past 52-week period.
The ETF has a beta of 0.94 and standard deviation of 36.09% for the trailing three-year period, making it a high risk choice in the space. With about 137 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR S&P Biotech 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.
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 $1.26 billion in assets, iShares Biotechnology ETF has $7.16 billion. FBT has an expense ratio of 0.56% 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.
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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.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
XBI is managed by State Street Global Advisors, and this fund has amassed over $6.84 billion, which makes 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
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for XBI are 0.35%, which makes 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
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that 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, Mirati Therapeutics Inc accounts for about 2.16% of the fund's total assets, followed by Immunovant Inc (IMVT - Free Report) and Apellis Pharmaceuticals Inc (APLS - Free Report) .
The top 10 holdings account for about 15.82% of total assets under management.
Performance and Risk
Year-to-date, the SPDR S&P Biotech ETF has added roughly 3.28% so far, and was up about 6.24% over the last 12 months (as of 12/18/2023). XBI has traded between $64.12 and $91.97 in this past 52-week period.
The ETF has a beta of 0.94 and standard deviation of 36.09% for the trailing three-year period, making it a high risk choice in the space. With about 137 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR S&P Biotech 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.
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 $1.26 billion in assets, iShares Biotechnology ETF has $7.16 billion. FBT has an expense ratio of 0.56% 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.