Should You Invest in the iShares U.S. Pharmaceuticals ETF (IHE)?
Sector ETF report for IHE
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 are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Healthcare - Pharma is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 9, placing it in bottom 44%.
The fund is sponsored by Blackrock. It has amassed assets over $381.81 million, making it one of the average sized 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.
When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.42%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.42%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. 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 22.62% of total assets, followed by Pfizer Inc (PFE) and Zoetis Inc Class A (ZTS).
The top 10 holdings account for about 76.87% of total assets under management.
Performance and Risk
The ETF has gained about 8.43% so far this year and is up roughly 19.93% in the last one year (as of 11/03/2021). In that past 52-week period, it has traded between $167.75 and $198.47.
The ETF has a beta of 0.83 and standard deviation of 20.77% for the trailing three-year period, making it a high risk choice in the space. With about 51 holdings, it effectively diversifies company-specific risk.
IShares U.S. Pharmaceuticals ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, IHE is a reasonable option for those seeking exposure to the Health Care ETFs area of the market. Investors might also want to consider some other ETF options in the space.
VanEck Pharmaceutical ETF (PPH) tracks MVIS US Listed Pharmaceutical 25 Index and the Invesco Dynamic Pharmaceuticals ETF (PJP) tracks Dynamic Pharmaceutical Intellidex Index. VanEck Pharmaceutical ETF has $334.87 million in assets, Invesco Dynamic Pharmaceuticals ETF has $439.68 million. PPH has an expense ratio of 0.35% and PJP charges 0.56%.
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
Johnson & Johnson (JNJ): Free Stock Analysis Report
Pfizer Inc. (PFE): Free Stock Analysis Report
Zoetis Inc. (ZTS): Free Stock Analysis Report
Invesco Dynamic Pharmaceuticals ETF (PJP): ETF Research Reports
VanEck Pharmaceutical ETF (PPH): ETF Research Reports
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