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Should You Invest in the iShares U.S. Pharmaceuticals ETF (IHE)?

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The iShares U.S. Pharmaceuticals ETF (IHE - Free Report) was launched on 05/01/2006, and is a passively managed exchange traded fund designed to offer broad exposure to the Healthcare - Pharma segment of the equity market.

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they 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 - Pharma is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 4, placing it in top 25%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $659.19 million, making it one of the larger ETFs attempting to match the performance of the Healthcare - Pharma segment of the equity market. IHE seeks to match the performance of the Dow Jones U.S. Select Pharmaceuticals Index before fees and expenses.

The Dow Jones U.S. Select Pharmaceuticals Index is free-float adjusted market capitalization-weighted index. It includes pharmaceutical companies such as manufacturers of prescription or over-the-counter drugs or vaccines, but excludes producers of vitamins.


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 this ETF are 0.40%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 1.42%.

Sector Exposure and Top Holdings

ETFs offer a 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.

This ETF has heaviest allocation in the Healthcare sector--about 100% of the portfolio.

Looking at individual holdings, Eli Lilly (LLY - Free Report) accounts for about 22.42% of total assets, followed by Johnson & Johnson (JNJ - Free Report) and Royalty Pharma Plc Class A (RPRX - Free Report) .

The top 10 holdings account for about 78.51% of total assets under management.

Performance and Risk

The ETF has added roughly 3.50% and it's up approximately 6.91% so far this year and in the past one year (as of 04/15/2024), respectively. IHE has traded between $55.54 and $69.55 during this last 52-week period.

The ETF has a beta of 0.66 and standard deviation of 14.88% for the trailing three-year period, making it a high risk choice in the space. With about 39 holdings, it has more concentrated exposure than peers.


IShares U.S. Pharmaceuticals 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, IHE 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.

Invesco Pharmaceuticals ETF (PJP - Free Report) tracks Dynamic Pharmaceutical Intellidex Index and the VanEck Pharmaceutical ETF (PPH - Free Report) tracks MVIS US Listed Pharmaceutical 25 Index. Invesco Pharmaceuticals ETF has $268.20 million in assets, VanEck Pharmaceutical ETF has $520.57 million. PJP has an expense ratio of 0.57% and PPH charges 0.36%.

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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