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PowerShares S&P SmallCap Healthcare Fund (PSCH - Free Report) topped the list of the best performing equity ETFs of the first half of 2018, with impressive returns of about 30.6%. The rally was mainly driven by tax reform, rising M&A and positive regulatory backdrop.
The new tax legislation has enabled large pharmaceutical companies to bring offshore cash back home at reduced tax rates of 8-15.5% instead of the prior 35%. The repatriated money has led to an increase in mergers and acquisitions activity, share buybacks and dividends. Additionally, the slower growth in mature drugs has also compelled prominent biotechs to acquire smaller ones, even at hefty premiums, with promising pipelines.
Further, Trump’s most-awaited plan to lower drug prices has added to the strength. If these were not enough, the sector’s non-cyclical nature is an advantage in the current market, which is ruffled by trade war fears, tariff concerns, and geopolitical tensions. Moreover, the fund’s small cap focus provided a huge boost, given that the pint-sized stocks are well insulated from these headwinds. These stocks are considered safe and better plays if any political issue or economic turmoil creeps into the picture (read: 4 Sector ETFs Braved Trade Turmoil in Q2).
Let’s take a closer look at the fundamentals of PSCH.
PSCH in Focus
This fund provides exposure to the health care sector of the U.S. small cap segment by tracking the S&P SmallCap 600 Capped Health Care Index. Holding 72 securities in its basket, the fund is widely diversified across components with each holding less than 4.5% share. From an industrial look, healthcare equipment & supplies, and healthcare providers & services take the top two spots at 27.7% share each followed by biotechnology with 22.1% allocation.
The product has amassed $758.2 million in its asset base and trades in a moderate average daily volume of around 57,000 shares. It charges 29 bps a year from investors and has a Zacks ETF Rank #1(Strong Buy) with a High risk outlook (read: 5 Hottest Small-Cap ETFs of 2018).
Though most of the stocks in the fund’s portfolio delivered strong returns, a few were the real stars, having gained more than 70%. Below we have highlighted those five best-performing stocks in the ETF with their respective positions in the fund’s basket:
Best Performing Stocks of PSCH
Tabula Rasa HealthCare Inc : The stock has surged about 128.2% in the first half. It currently carries a Zacks Rank #2 (Buy) and has a VGM Score of F. The stock has seen positive earnings estimate revision of 28 cents for this year over the past three months with an estimated earnings growth rate of 188.89%. TRHC accounts for 0.9% in the fund’s portfolio. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
REGENXBIO Inc (RGNX - Free Report) : This stock takes the sixteenth position in the fund’s basket with 1.9% allocation. It has also delivered incredible returns of 115.9%. The Zacks Consensus Estimate for 2018 moved up from a loss of 72 cents to earnings of $1.89, indicating year-over-year growth of 177.14%. REGENXBIO has a Zacks Rank #3 (Hold) and a VGM Score of C.
Surmodics Inc (SRDX - Free Report) : This stock takes 0.7% of the assets in the fund’s basket and has jumped about 97% in the first half. The Zacks Consensus Estimate for fiscal year (ending September 2018) narrowed from a loss of 27 cents to a loss of a couple of cents. However, its earnings are expected to decline 103.92% from the year-ago level. Surmodics currently has a Zacks Rank #2 and a VGM Score of C.
Enanta Pharmaceuticals Inc (ENTA - Free Report) : The stock has surged nearly 92.5% in the first half. It carries a Zacks Rank #2 and a VGM Score of F. The stock has seen robust earnings estimate revision of $2.31 for fiscal year (ending September 2018) over the past three months and has an estimated growth rate of 248.35%. The stock accounts for 1.6% share in PSCH (see: all the Healthcare ETFs here).
Tactile Systems Technology Inc (TCMD - Free Report) : The stock has gained about 79.4% in the first half. It has seen positive earnings estimate revision of nine cents for this year over the past three months with an expected earnings growth rate of 71.43%. Tactile Systems currently has a Zacks Rank #3 and a VGM Score of D. The stock makes up for 0.8% share in the fund’s basket.
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5 Top Performing Stocks of the Best ETF of 1H2018
PowerShares S&P SmallCap Healthcare Fund (PSCH - Free Report) topped the list of the best performing equity ETFs of the first half of 2018, with impressive returns of about 30.6%. The rally was mainly driven by tax reform, rising M&A and positive regulatory backdrop.
The new tax legislation has enabled large pharmaceutical companies to bring offshore cash back home at reduced tax rates of 8-15.5% instead of the prior 35%. The repatriated money has led to an increase in mergers and acquisitions activity, share buybacks and dividends. Additionally, the slower growth in mature drugs has also compelled prominent biotechs to acquire smaller ones, even at hefty premiums, with promising pipelines.
Further, Trump’s most-awaited plan to lower drug prices has added to the strength. If these were not enough, the sector’s non-cyclical nature is an advantage in the current market, which is ruffled by trade war fears, tariff concerns, and geopolitical tensions. Moreover, the fund’s small cap focus provided a huge boost, given that the pint-sized stocks are well insulated from these headwinds. These stocks are considered safe and better plays if any political issue or economic turmoil creeps into the picture (read: 4 Sector ETFs Braved Trade Turmoil in Q2).
Let’s take a closer look at the fundamentals of PSCH.
PSCH in Focus
This fund provides exposure to the health care sector of the U.S. small cap segment by tracking the S&P SmallCap 600 Capped Health Care Index. Holding 72 securities in its basket, the fund is widely diversified across components with each holding less than 4.5% share. From an industrial look, healthcare equipment & supplies, and healthcare providers & services take the top two spots at 27.7% share each followed by biotechnology with 22.1% allocation.
The product has amassed $758.2 million in its asset base and trades in a moderate average daily volume of around 57,000 shares. It charges 29 bps a year from investors and has a Zacks ETF Rank #1(Strong Buy) with a High risk outlook (read: 5 Hottest Small-Cap ETFs of 2018).
Though most of the stocks in the fund’s portfolio delivered strong returns, a few were the real stars, having gained more than 70%. Below we have highlighted those five best-performing stocks in the ETF with their respective positions in the fund’s basket:
Best Performing Stocks of PSCH
Tabula Rasa HealthCare Inc : The stock has surged about 128.2% in the first half. It currently carries a Zacks Rank #2 (Buy) and has a VGM Score of F. The stock has seen positive earnings estimate revision of 28 cents for this year over the past three months with an estimated earnings growth rate of 188.89%. TRHC accounts for 0.9% in the fund’s portfolio. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
REGENXBIO Inc (RGNX - Free Report) : This stock takes the sixteenth position in the fund’s basket with 1.9% allocation. It has also delivered incredible returns of 115.9%. The Zacks Consensus Estimate for 2018 moved up from a loss of 72 cents to earnings of $1.89, indicating year-over-year growth of 177.14%. REGENXBIO has a Zacks Rank #3 (Hold) and a VGM Score of C.
Surmodics Inc (SRDX - Free Report) : This stock takes 0.7% of the assets in the fund’s basket and has jumped about 97% in the first half. The Zacks Consensus Estimate for fiscal year (ending September 2018) narrowed from a loss of 27 cents to a loss of a couple of cents. However, its earnings are expected to decline 103.92% from the year-ago level. Surmodics currently has a Zacks Rank #2 and a VGM Score of C.
Enanta Pharmaceuticals Inc (ENTA - Free Report) : The stock has surged nearly 92.5% in the first half. It carries a Zacks Rank #2 and a VGM Score of F. The stock has seen robust earnings estimate revision of $2.31 for fiscal year (ending September 2018) over the past three months and has an estimated growth rate of 248.35%. The stock accounts for 1.6% share in PSCH (see: all the Healthcare ETFs here).
Tactile Systems Technology Inc (TCMD - Free Report) : The stock has gained about 79.4% in the first half. It has seen positive earnings estimate revision of nine cents for this year over the past three months with an expected earnings growth rate of 71.43%. Tactile Systems currently has a Zacks Rank #3 and a VGM Score of D. The stock makes up for 0.8% share in the fund’s basket.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>