Should You Invest in the Health Care Select Sector SPDR ETF (XLV)?
Sector ETF report for XLV
Designed to provide broad exposure to the Healthcare - Broad segment of the equity market, the Health Care Select Sector SPDR ETF (XLV) is a passively managed exchange traded fund launched on 12/16/1998.
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.
Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Healthcare - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 12, placing it in bottom 25%.
The fund is sponsored by State Street Global Advisors. It has amassed assets over $30.72 billion, making it the largest ETF attempting to match the performance of the Healthcare - Broad segment of the equity market. XLV seeks to match the performance of the Health Care Select Sector Index before fees and expenses.
The Health Care Select Sector Index includes companies from the following industries: pharmaceuticals; health care providers & services; health care equipment & supplies; biotechnology; life sciences tools & services; and health care technology.
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for this ETF are 0.12%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 1.37%.
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.
This ETF has heaviest allocation in the Healthcare sector--about 100% of the portfolio.
Looking at individual holdings, Johnson & Johnson (JNJ) accounts for about 9.26% of total assets, followed by Unitedhealth Group Incorporated (UNH) and Pfizer Inc. (PFE).
The top 10 holdings account for about 49.91% of total assets under management.
Performance and Risk
So far this year, XLV return is roughly 17.76%, and was up about 24.26% in the last one year (as of 10/25/2021). During this past 52-week period, the fund has traded between $101.66 and $136.85.
The ETF has a beta of 0.77 and standard deviation of 21.08% for the trailing three-year period, making it a medium risk choice in the space. With about 66 holdings, it effectively diversifies company-specific risk.
Health Care Select Sector SPDR ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, XLV is an outstanding 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.
ARK Genomic Revolution ETF (ARKG) tracks N/A and the Vanguard Health Care ETF (VHT) tracks MSCI US Investable Market Health Care 25/50 Index. ARK Genomic Revolution ETF has $7.17 billion in assets, Vanguard Health Care ETF has $16.47 billion. ARKG has an expense ratio of 0.75% and VHT charges 0.10%.
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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Health Care Select Sector SPDR ETF (XLV): ETF Research Reports
UnitedHealth Group Incorporated (UNH): Free Stock Analysis Report
Johnson & Johnson (JNJ): Free Stock Analysis Report
Pfizer Inc. (PFE): Free Stock Analysis Report
Vanguard Health Care ETF (VHT): ETF Research Reports
ARK Genomic Revolution ETF (ARKG): ETF Research Reports
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