The biotech market is flourishing with the growing demand for better medicines and solutions, rapid development in the field, and adoption of cutting-edge technologies. Thus, investing in biotech ETFs can offer potential higher returns and create opportunities for diversification for investors.
Therefore, investors could consider investing in the best-performing biotech ETFs SPDR S&P Biotech ETF (XBI), VanEck Biotech ETF (BBH), and iShares Biotechnology ETF (IBB) for a diversified portfolio.
The biotech market is rapidly evolving and growing as the modern biotech landscape is expanding widely with innovations, like rapidly engineered lifesaving therapeutics, ecological replacements for traditional textiles, and biological enzymes that dissolve plastic waste. This is further accelerated by rapid adoption of AI, product revolution, and application of bioengineered systems.
Further, amid the rising cases of chronic diseases like diabetes or cancers across the globe are fueling the demand for biotechnology products and will continue in the coming years. With this, the biotechnology market is expected to experience growth at a notable CAGR of 13.9%, to reach around $3.90 trillion by 2031.
Amid this, investing in biotech ETFs can offer high potential for optimum returns and suitable diversification of the portfolio. The industry is positioned for expansion with new emerging technologies, effective products and solutions, ever-growing demand for medicines, and a widening scale of the industry.
Given these encouraging trends, let’s look at the fundamentals of the top three Health & Biotech ETFs, beginning with number 3.
ETF #3: SPDR S&P Biotech ETF (XBI)
XBI tracks an equal-weighted index of US biotechnology stocks. The ETF offers exposure to US biotech stocks, as defined by GICS that invests across the market-cap spectrum. XBI follows a pure biotech play with minor pharma overlap. It equal-weights its portfolio and emphasizes on small- and micro-caps which reduces single-name risk.
XBI tracks the S&P Biotechnology Select Industry index. The fund has assets under management (AUM) of $7.14 billion. Its top holdings include Exact Sciences Corporation (EXAS) with a 3.65% weighting, followed by Gilead Sciences, Inc. (GILD) and Alnylam Pharmaceuticals, Inc (ALNY) at 3.11% each, and its holding include United Therapeutics Corporation (UTHR) with a 3.06% weighting, respectively.
The ETF has a total of 140 holdings, with its top 10 assets comprising 30.10% of its AUM. XBI’s expense ratio is 0.35%, lower than the category average of 0.52%. Over the past month, its fund inflows were $148.91 million and $250.16 million over the past three months.
XBI pays an annual dividend of $0.13, which translates to a 0.13% yield at the current price level. Moreover, the fund’s dividend payouts have increased at a CAGR of 8.8% over the past five years.
XBI has surged 4.9% over the past six months and 20.5% over the past year to close the last trading session at $95.54. It has a beta of 0.97. The fund’s NAV was $95.58 as of August 09, 2024.
XBI’s POWR Ratings reflect solid prospects. The fund has an overall rating of B, translating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
XBI has an A grade for Trade and a B for Buy & Hold. Within the A-rated Health & Biotech ETFs group, it is ranked #22 out of 42 ETFs.
To access all XBI’s POWR Ratings, click here.
ETF #2: VanEck Biotech ETF (BBH)
BBH seeks to track a market-cap-weighted index of the 25 largest biotech firms globally and provide a more concentrated exposure of the global biotech industry. The ETF chooses 25 US listed companies by market cap and also weighs each constituent by market cap and invest. The fund tracks the MVIS US Listed Biotech 25 index.
With $437.40 million in AUM, BBH’s top holdings are Amgen Inc. (AMGN) with a 15.22% weighting, Vertex Pharmaceuticals Incorporated (VRTX) at 9.77%, and Regeneron Pharmaceuticals, Inc. (REGN) and Gilead Sciences, Inc. with 8.29% and 7.71% weightings, respectively.
The fund has a total of 27 holdings, with its top 10 assets comprising 67.96% of its AUM. It has an expense ratio of 0.35%, compared to the category average of 0.52%.
BBH pays an annual dividend of $0.71, which translates to a 0.40% yield at the current price level. Moreover, the fund’s dividend payouts have increased at a CAGR of 5.4% over the past three years. BBH has paid dividends for 8 consecutive years.
BBH has gained 8.7% over the past six months and 9% over the past year to close the last trading session at $176.13. It has a beta of 0.85. The fund’s NAV was $176.32 as of August 09, 2024.
BBH’s sound fundamentals are reflected in its POWR Ratings. The fund has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The fund has an A grade for Trade and Buy & Hold. It also has a B grade for Peer. Of the 42 ETFs in the A-rated Health & Biotech ETFs group, BBH is ranked #12.
Click here to see all the BBH ratings.
ETF #1: iShares Biotechnology ETF (IBB)
IBB tracks a modified market-cap-weighted index of US biotechnology companies listed on US exchanges. The ETF invests in companies engaged in the R&D of therapeutic treatments but are not focused on the commercialization and mass production of pharmaceutical drugs. The ETF tracks the ICE Biotechnology Index.
The fund has an AUM of $7.46 billion. Its top holdings include Gilead Sciences, Inc. and Regeneron Pharmaceuticals, Inc. with 8.85% and 8.54% weighting, followed by Amgen Inc., and Vertex Pharmaceuticals Incorporated at 7.99% and 7.70% weighting, respectively.
IBB has a total of 211 holdings, with the top 10 assets comprising 51.47% of its AUM. The fund has an expense ratio of 0.45%, lower than the category average of 0.52%. Over the past month, IBB fund inflows came in at $70.30 million and $108.78 million over the past three months. Also, it has a beta of 0.84.
IBB has gained 5.6% over the past six months and 11.3% over the past year to close the last trading session at $142.17. The fund has a NAV of $142.22 as of August 09, 2024.
IBB’s POWR Ratings reflect its strong outlook. The ETF has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
IBB has an A grade for Buy & Hold and Trade. The fund is ranked #3 among the list of 42 ETFs in the same group.
To access all the POWR Ratings for IBB, click here.
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IBB shares were unchanged in after-hours trading Wednesday. Year-to-date, IBB has gained 5.21%, versus a 15.12% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
3 Biotech ETFs for a Diversified Portfolio StockNews.com
