If you're interested in broad exposure to the Healthcare - Pharma segment of the equity market, look no further than the iShares U.S. Pharmaceuticals ETF (IHE), a passively managed exchange traded fund launched on 05/01/2006.
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 - Pharma is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 5, placing it in top 31%.
Index Details
The fund is sponsored by Blackrock. It has amassed assets over $668.11 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.
Costs
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.39%, making it one of the cheaper products in the space.
It has a 12-month trailing dividend yield of 1.48%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, 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, Johnson & Johnson (JNJ) accounts for about 22.09% of total assets, followed by Eli Lilly (LLY) and Bristol Myers Squibb (BMY).
The top 10 holdings account for about 77.95% of total assets under management.
Performance and Risk
Year-to-date, the iShares U.S. Pharmaceuticals ETF return is roughly 17.78% so far, and was up about 23.12% over the last 12 months (as of 10/21/2024). IHE has traded between $55.54 and $72.86 in this past 52-week period.
The ETF has a beta of 0.65 and standard deviation of 14.80% for the trailing three-year period, making it a high risk choice in the space. With about 42 holdings, it has more concentrated exposure than peers.
Alternatives
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) tracks Dynamic Pharmaceutical Intellidex Index and the VanEck Pharmaceutical ETF (PPH) tracks MVIS US Listed Pharmaceutical 25 Index. Invesco Pharmaceuticals ETF has $288.54 million in assets, VanEck Pharmaceutical ETF has $727.51 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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iShares U.S. Pharmaceuticals ETF (IHE): ETF Research Reports
Bristol Myers Squibb Company (BMY) : Free Stock Analysis Report
Johnson & Johnson (JNJ) : Free Stock Analysis Report
Eli Lilly and Company (LLY) : Free Stock Analysis Report
Invesco Pharmaceuticals ETF (PJP): ETF Research Reports
VanEck Pharmaceutical ETF (PPH): ETF Research Reports
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