Home News The Best Healthcare ETFs for Q4 2022

The Best Healthcare ETFs for Q4 2022

by SuperiorInvest

Health care exchange traded funds (ETFs) invest in a basket of stocks companies that provide medical services, develop medical equipment or drugs, offer health insurance, or facilitate the delivery of health care to patients. Some major companies in healthcare include UnitedHealth Group Inc. (UNH), Pfizer Inc. (PFE) and Merck & Co. Inc. (MRK).

As most healthcare services and products are often considered necessities rather than voluntary purchases, the healthcare industry is considered non-cyclical. This can make healthcare ETFs a strong defensive position portfolios.

Key things

  • The healthcare sector has outperformed the broader market over the past year.
  • The healthcare exchange-traded funds (ETFs) with the best annual total returns are IHF, PPH and XLV.
  • The top holdings of these ETFs are UnitedHealth Group Inc. for the first and third funds and Mckesson Corporation for the second fund.

January 31, 2022 US Food and Drug Administration (FDA) fully approved by Moderna Inc. (MRNA) vaccine to prevent COVID-19 in individuals 18 years of age and older. The vaccine, which has been available under an emergency use authorization (EUA) since December 2020, is now marketed as Spikevax. It was the second COVID-19 vaccine to receive full FDA approval after a vaccine jointly developed by Pfizer and BioNTech SE (BNTX), marketed as Comirnaty, was approved in August 2021. In May 2022, the FDA set limits on a COVID-19 vaccine made by Johnson & Johnson (JNJ), citing safety concerns related to the rare blood clotting condition.

The world of healthcare ETFs consists of approximately 33 different ETFs that trade in the US, excluding inverse and leverage effect ETFs as well as funds with less than $50 million assets under management (AUM). As of August 29, 2022, the healthcare sector, as measured by the S&P 500 Health Care Sector Index, has outperformed the broader market with a trailing 12-month total return of -4.6%, compared to a -9.3% S&P 500 total return.

The top healthcare ETF, based on performance over the past year, is the iShares US Healthcare Providers ETF (IHF). We examine three of the best healthcare ETFs below. All data below is as of August 30, 2022.

  • Total return in one year: 1.5%
  • Cost ratio: 0.39%
  • Annual Dividend yield: 0.55%
  • Three-month average per day Volume: 61,958
  • Assets under management: $1.5 billion
  • Start date: May 1, 2006
  • Issuing company: BlackRock Financial Management

The IHF tracks the Dow Jones US Select Health Care Providers Index, which measures the performance of various healthcare organizations. IHF is a mixed multi-capital fund. It provides exposure to domestic companies that specialize in healthcare, diagnostic research and medical devices. The fund consists primarily of the healthcare and commercial services sectors.

IHF’s three largest holdings are UnitedHealth Group, a company focused on health care plans for individuals and businesses; CVS Health Corporation (CVS), which provides health insurance benefits and operates various retail locations focused on merchandise such as pharmaceuticals and personal care products; and Elevance Health Inc. (ELV), a health benefits company that helps customers find different care solutions.

  • Performance in one year: -5.2%
  • Expense ratio: 0.35%
  • Annual dividend yield: 1.63%
  • Three-month average daily volume: 181,843
  • Assets under management: $552.0 million
  • Start date: February 1, 2000
  • Issuer: VanEck

PPH aims to track the MVIS US Listed Pharmaceutical 25 Index, which measures the performance of companies operating in the pharmaceutical industry. The ETF provides exposure to US and international companies involved in the research and development, manufacture and sale of pharmaceuticals. It focuses on the most liquid companies based on Market capitalization and trade volume. The fund follows a mixed strategy of investing in a combination of growth and value shares across developed markets.

PPH’s three largest holdings are McKesson Corporation (MCK), a company that manufactures pharmaceuticals and other medical devices; Sponsored by Astrazeneca PLC ADR (AZN), a British-Swedish pharmaceutical and biotechnology company; and Eli Lily and Company (LLY), a healthcare company that manufactures and distributes pharmaceutical products.

  • Total return in one year: -5.9%
  • Expense ratio: 0.10%
  • Annual dividend yield: 1.36%
  • Three-month average daily volume: 8,391,262
  • Assets under management: $38.1 billion
  • Start date: December 16, 1998
  • Issuing company: State Street

XLV seeks to track the Healthcare Select Sector Index, which measures the performance of the healthcare sector of the US stock market. The market-cap-weighted ETF provides exposure to companies that offer medical equipment, supplies and services, as well as companies in the biotechnology and pharmaceutical industries. It is aimed at large capacity growth stocks.

XLV’s top three holdings are UnitedHealth Group; Johnson & Johnson (JNJ), which develops medical devices, pharmaceuticals and consumer packaged goods; and Pfizer, a pharmaceutical and biotechnology company.

The comments, opinions and analysis expressed herein are for informational purposes only and should not be construed as individual investment advice or recommendations to invest in any security or adopt any investment strategy. Although we believe that the information provided here is reliable, we do not guarantee its accuracy or completeness. The opinions and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions and analysis contained in our content are provided as of the date of publication and are subject to change without notice. The material is not intended to be a complete analysis of all material facts relating to any country, region, market, industry, investment or strategy.

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