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10 Best Performing Healthcare ETFs in 2023

In this piece, we will take a look at the ten best performing healthcare ETFs in 2023. If you want to skip our overview of the healthcare sector, then take a look at the 5 Best Performing Healthcare ETFs in 2023.

The healthcare industry is one of the biggest in the world. It is also one of the most unique sectors on the stock market, as healthcare stocks are made of both consumer discretionary and cyclical firms. This often means that during a time of economic turmoil, the broader healthcare sector can lag broader stock indexes in losses as the defensive portion hedges losses. For those out of the loop, defensive stocks are those companies that sell essential products such as food. Cyclical stocks are growth stocks that perform well when the economy is growing. To learn more about defensive and cyclical stocks, you can check out 12 Defensive Healthcare Dividend Stocks To Invest In and 11 Best Consumer Cyclical Stocks To Buy Now.

Within the healthcare sector, mega pharma giants such as Pfizer Inc. (NYSE:PFE) are somewhat defensive. This is because these firms often sell drugs that are essential for the normal daily functioning of people with chronic diseases such as hypertension and diabetes. On the flip side, the cyclical sector of the healthcare industry involves high risk and high growth firms such as biotechnology and genomic companies. These firms, such as Moderna, Inc. (NASDAQ:MRNA) and CRISPR Therapeutics AG (NASDAQ:CRSP), often invest millions of dollars in developing new technology often years before they can secure regulatory approval and turn a profit.

This divide within the healthcare industry was also evident last year. 2022 was one of the worst years for growth stocks as the inflationary impacts of the coronavirus pandemic were amplified by the disruption in the oil supply chain due to the Russian invasion of Ukraine. This made investors flock to oil stocks and shun high growth areas such as personal computing and technology. During this turmoil, the healthcare divide allowed the sector to hedge broader stock market losses since while the S&P 500 index dropped by 18.5% in 2022, the S&P 500 Healthcare Index dropped by 2.44% and provided investors with a safe haven to protect their money as they waited for rosier times. This healthcare buffer came when the sector as a whole presented less volatility, with data from BlackRock, Inc. (NYSE:BLK) showing that healthcare stocks demonstrated 23% less volatility compared to the broader market in 2022.

Overall, the global healthcare industry is slated to grow at a compounded annual growth rate (CAGR) of 21.92% to be worth a whopping $7.3 trillion by the end of this year. Like other industries, such as energy, healthcare is also divided into several segments. Some of these are the budding telehealth and healthcare service industries. Research shows that the telehealth industry was worth $48.2 billion in 2022 and it should reach $57.1 billion by 2023 end. Similarly, the healthcare services industry, which was worth a whopping $10 trillion in 2021, is expected to grow at a CAGR of 8.27% between 2023 and 2030 to be worth $21 trillion by the end of the forecast period.

Any discussion about any industry in 2023 would be incomplete without mentioning artificial intelligence (AI). AI has been the trend for the stock market this year and it contributed a large portion of the market’s gains during the first half. AI has several applications in healthcare, such as using advanced algorithms to help researchers in drug discovery, and according to research from the investment bank Morgan Stanley (NYSE:MS), 94% of healthcare companies are using AI or machine learning. Additionally, healthcare budget allocations to AI and ML are expected to grow to touch 10.5% in 2024, and overall, AI in healthcare is believed to be worth $137 billion this year and cross $181 billion by 2030 end.

Shifting gears to focus on healthcare companies, they are just exiting the third quarter of 2023 earnings season. Starting from Pfizer Inc. (NYSE:PFE), the U.S. healthcare giant reported 17 cents in loss per share during Q3 which beat analyst estimates of a 34 cent loss. It also marked a substantial drop over the year ago quarter’s earnings per share of $1.78 when Pfizer was fully profiting from its coronavirus vaccine sales. While Pfizer was unable to sustain its momentum during the third quarter, the other U.S. healthcare giant Eli Lilly and Company (NYSE:LLY) had a bumper quarter in Q3. Its diabetes drug Mounjaro, which is also used by people looking to reduce their weight, drove the company’s earnings per share to ten cents which smashed analyst estimates of a 13 cent loss per share. During Q3, Eli Lilly and Company (NYSE:LLY)’s Mounjaro crossed $1 billion in revenue by posting $1.4 billion in revenue that also beat analyst estimates of $1.3 billion.

As to Mounjaro’s future, here’s what the firm’s management had to say during the third quarter’s earnings call:

Looking forward to the end of the year with increased access we expect to continue to see overall growth in prescription trends. In terms of Mounjaro supply, we’re continuing to make progress in our manufacturing expansion agenda. Given strong demand, we continue to experience tight supply throughout most of Q3, which impacted results for the quarter. Most recently U.S. product shipments have increased and inventory levels at U.S. wholesalers have improved with all doses of Mounjaro now listed as available on the FDA shortage website. While supply constraints have eased in the U.S., outside the U.S. Trulicity and — outside the U.S. to Trulicity and Mounjaro supply remains tight, which materially impacted performance in these regions. With device assembly online at RTP, we are on track to achieve our goal of doubling capacity by the end of this year from where we were a year ago, and are gradually increasing production each quarter.

We’re also continuing to focus on other parts of the supply chain, as demand is expected to remain high and production bottlenecks may shift over time. As we mentioned in last quarter’s earnings call, we are moving forward with different presentation of Mounjaro to reach more patients around the world faster. We have launched with a single dose vial in Australia, and plan to launch in other markets outside the U.S. in the coming weeks and months. The introduction of a single dose vial presentation in these geographies is intended to serve as a bridge to a multi-dose quick pen, which we expect will be available starting in 2024. We’re also preparing for potential launch of tirzepatide for obesity in the U.S. this year. Our auto injector capacity and output continues to increase.

So, as the healthcare sector continues to be driven by product specific performance, we took a look at the best performing healthcare ETFs in 2023. The top three best healthcare ETFs in 2023 are ProShares UltraShort Health Care (NYSE:RXD), ProShares UltraShort Nasdaq Biotechnology (NASDAQ:BIS), and Direxion Daily S&P Biotech Bear 3X Shares (NYSE:LABD).

Our Methodology

To compile our list of the best performing healthcare ETFs in 2023, we ranked all healthcare ETFs by their year to date returns. The top healthcare ETFs in 2023 in terms of their YTD gains are as follows.

Best Performing Healthcare ETFs in 2023

10. Virtus LifeSci Biotech Products ETF (NYSE:BBP)

Year to date returns: -4.70%

Virtus LifeSci Biotech Products ETF (NYSE:BBP) is an ETF part of the Virtus fund family. It has $14 million in net assets and was set up in 2014. The ETF primarily invests in small cap growth stocks which are part of the LifeSci Biotechnology Products Index. Some of the ETF’s top stock picks are Intercept Pharmaceuticals, Inc. (NASDAQ:ICPT), BridgeBio Pharma, Inc. (NASDAQ:BBIO), and Rhythm Pharmaceuticals, Inc. (NASDAQ:RYTM).

Just like ProShares UltraShort Nasdaq Biotechnology (NASDAQ:BIS), ProShares UltraShort Health Care (NYSE:RXD), and Direxion Daily S&P Biotech Bear 3X Shares (NYSE:LABD), the Virtus LifeSci Biotech Products ETF (NYSE:BBP)  is one of the best performing healthcare ETFs in 2023.

9. iShares Global Healthcare ETF (NYSE:IXJ)

Year to date returns: -4.27%

iShares Global Healthcare ETF (NYSE:IXJ) is part of the iShares fund family. It is one of the biggest ETFs on our list of the best performing healthcare ETFs in 2023 since the fund has $3.8 billion in net assets. The ETF tracks the S&P Global 1200 Healthcare Sector Index index and it was set up in 2001.

8. Global X Aging Population ETF (NASDAQ:AGNG)

Year to date returns: -2.49%

Global X Aging Population ETF (NASDAQ:AGNG) is part of the Global Funds fund family. It has $50 million in net assets and was set up in 2016. The ETF is a specialized healthcare fund that invests primarily in firms that seek to develop medical and healthcare products for senior citizens and aged individuals. The Global X Aging Population ETF (NASDAQ:AGNG) has invested in 93 holdings, with some notable picks being Eli Lilly and Company (NYSE:LLY) and Chugai Pharmaceutical Co., Ltd. (TYO:4519.T).

7. Global X Health Care Covered Call & Growth ETF (NYSE:HYLG)

Year to date returns: -2.06%

Global X Health Care Covered Call & Growth ETF (NYSE:HYLG) is another small ETF with just $2.58 million in net assets. It was set up less than a year back in 2022 and is part of the Global X fund family. This ETF is a specialized vehicle since it writes call options that seek to capitalize through upside potential.

6. VanEck Pharmaceutical ETF (NASDAQ:PPH)

Year to date returns: -0.11%

VanEck Pharmaceutical ETF (NASDAQ:PPH) is part of the VanEck fund family and has $383 million in net assets. Its benchmark index is the MVIS® US Listed Pharmaceutical 25 Index, which narrows down its focus to pharmaceutical companies only. Some top VanEck Pharmaceutical ETF (NASDAQ:PPH) stock picks are Eli Lilly and Company (NYSE:LLY), Johnson & Johnson (NYSE:JNJ), and Novo Nordisk A/S (NYSE:NVO).

ProShares UltraShort Health Care (NYSE:RXD), VanEck Pharmaceutical ETF (NASDAQ:PPH), ProShares UltraShort Nasdaq Biotechnology (NASDAQ:BIS), and Direxion Daily S&P Biotech Bear 3X Shares (NYSE:LABD) are some top performing healthcare ETFs in 2023.

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Disclosure: None. 10 Best Performing Healthcare ETFs in 2023 is originally published on Insider Monkey.

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