In this article, we discuss the 5 best pharma ETFs. If you want to read our discussion on the pharma industry, you can go directly to the 12 Best Pharma ETFs.
5. iShares Global Healthcare ETF (NYSEARCA:IXJ)
5-Year Performance as of September 11, 2023: 39.99%
Total Net Assets as of September 11, 2023: $3.99 billion
Expense Ratio: 0.42%
iShares Global Healthcare ETF (NYSEARCA:IXJ) is another member of BlackRock’s iShares ETF family in our list of best pharma ETFs. The ETF intends to provide investment results that closely correspond to the performance of the S&P Global 1200 Health Care Sector Index. iShares Global Healthcare ETF (NYSEARCA:IXJ) aims to give investors exposure to the global healthcare sector, which includes companies involved in pharmaceuticals, biotechnology, healthcare equipment, healthcare providers, and other related industries on a global scale. The fund was established in November 2001.
4. iShares U.S. Medical Devices ETF (NYSEARCA:IHI)
5-Year Performance as of September 11, 2023: 41.21%
Total Net Assets as of September 11, 2023: $6.1 billion
Expense Ratio: 0.40%
iShares U.S. Medical Devices ETF (NYSEARCA:IHI) is focused on replicating the performance of the Dow Jones U.S. Select Medical Equipment Index. The fund was created in May 2006.
iShares U.S. Medical Devices ETF (NYSEARCA:IHI) has 61 holdings, with Thermo Fisher Scientific Inc. (NYSE:TMO), Abbott Laboratories (NYSE:ABT), and Medtronic plc (NYSE:MDT) occupying the top three positions with a combined weightage of 39.46%.
Here’s what Appleseed Fund said about Medtronic plc (NYSE:MDT) in its Q1 2023 investor letter:
“During the most recent quarter, Appleseed Fund added three new equity holdings: Medtronic plc (NYSE:MDT), Stanley Black & Decker (SWK), and Synovus Financial (SNV). Medtronic is the world’s largest device manufacturer, and it holds the number one or number two market share in most of its product segments. Medtronic’s business is heavily weighted towards complicated in-patient procedures, which are typically quite profitable. Industry dynamics are quite attractive with an aging global population and the growth of improved healthcare in emerging markets; furthermore, most of its segments are highly concentrated with just 2-3 players that split each segment’s market share, affording the key participants with significant economies of scale and pricing power. The Company has been recently addressing several temporary headwinds including a strong dollar, inflation, a delayed recovery in surgical volumes from the coronavirus pandemic, and supply chain issues. Once these issues reach the rearview mirror, the Company’s growth and margin expansion plans should transform into reality.”
3. iShares U.S. Healthcare ETF (NYSEARCA:IYH)
5-Year Performance as of September 11, 2023: 42.8%
Total Net Assets as of September 11, 2023: $3.2 billion
Expense Ratio: 0.40%
iShares U.S. Healthcare ETF (NYSEARCA:IYH) is the fifth and the best-performing member of BlackRock’s iShares family on this list. The ETF came into being in June 2000 and tracks the performance of the Russell 1000 Health Care RIC 22.5/45 Capped Gross Index. iShares U.S. Healthcare ETF (NYSEARCA:IYH) has 117 holdings and a quarterly distribution frequency with a P/E ratio of 23.52x.
The ETF holds the largest position in Eli Lilly and Company (NYSE:LLY), making it the fifth ETF on our list, with the Indianapolis, Indiana-based pharmaceutical company as one of its top three holdings.
2. Health Care Select Sector SPDR Fund (NYSEARCA:XLV)
5-Year Performance as of September 11, 2023: 43.79%
Total Net Assets as of September 11, 2023: $40.07 billion
Expense Ratio: 0.10%
Health Care Select Sector SPDR Fund (NYSEARCA:XLV) is the biggest ETF on our list in terms of total assets under management (AUM). Additionally, it is one of the two ETFs on our list with the lowest expense ratio. In December 2023, the fund will mark its 25th anniversary since its inception.
UnitedHealth Group Incorporated (NYSE:UNH), Eli Lilly and Company (NYSE:LLY), and Johnson & Johnson (NYSE:JNJ) are the top three holdings of the ETF. Together, these three companies have a weightage of 25.55%. The ETF allocates 31.2% of its assets to the pharmaceutical industry, with healthcare providers following closely behind with a 21.08% allocation.
1. Direxion Daily Healthcare Bull 3X Shares (NYSEARCA:CURE)
5-Year Performance as of September 11, 2023: 60.92%
Total Net Assets as of September 11, 2023: $198.74 million
Expense Ratio: 0.99%
Direxion Daily Healthcare Bull 3X Shares (NYSEARCA:CURE) is designed for traders and investors who seek leveraged exposure to the healthcare sector of the US equity market. Specifically, this ETF aims to provide daily returns that are three times the daily performance of the Health Care Select Sector Index.
However, such leveraged ETFs also come with higher risk due to the compounding effect and potential for significant losses during market volatility. The ETF resets its leverage daily, which means it aims to achieve its investment objectives daily. Over longer periods, the compounding effect of daily resetting can result in returns that deviate from the expected multiple of the index.
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