Zacks Investment Ideas feature highlights: Market Vectors Biotech ETF, iShares
Nasdaq Biotechnology ETF, Regeneron, Celgene and First Trust Amex
Biotechnology Index Fund
CHICAGO, June 12, 2013
CHICAGO, June 12, 2013 /PRNewswire/ -- Today, Zacks Investment Ideas feature
highlights Features: Market Vectors Biotech ETF (AMEX:BBH-Free Report),
iShares Nasdaq Biotechnology ETF (Nasdaq:IBB-Free Report), Regeneron
(Nasdaq:REGN-Free Report), Celgene (Nasdaq:CELG-Free Report) and First Trust
Amex Biotechnology Index Fund (AMEX:FBT-Free Report).
3 Biotech ETFs Crushing the Market
Biotechnology ETFs are among the fasting growing companies in the health care
world and are at the forefront of the sector rotation movement. As such, they
look to benefit from the broad move away from boring low growth firms, and
into higher growth, riskier sectors (read Biotechnology ETF Investing 101).
Biotech ETFs are also seeing truly impressive levels of momentum as of late,
crushing not only the overall market, but broader health care sector funds as
well. In fact, over the past six months, the average outperformance of the
biotech ETF sector over the broader health care market has been about 800
basis points, suggesting that a tilt towards biotechs certainly hasn't been a
Beyond momentum, the sector also looks well-positioned to benefit from the
coming Obamacare changes. It managed to avoid the tax issue of the medical
device space, while biotech's many new drugs look to be gobbled up by the
larger base of insured persons across the U.S.
Mergers and acquisitions have also been a big deal for biotechnology firms,
and with a return to M&A activity, this could act as a nice catalyst for the
space as well. This is especially true given that the biotech companies
generally have decent drug pipelines, and many are small and mid caps that
make for ideal takeover targets anyway (see Two ETFs for the Muddle Through
Zacks Industry Rank
If that wasn't enough, investors should also note that the biotech-genome
Zacks Industry Rank is quite favorable as well. At time of writing, this
metric came in just outside the top third overall, while the average Zacks
Rank for the industry has moved in the right direction over the past week too.
Top Biotech ETFs to Consider
Given this favorable position of the biotech industry, investors may want to
consider some of the ETFs tracking this space for exposure. While there a
number of quality choices in the space, we have highlighted some of our
favorite top performing biotech ETFs below, any of which could make for
excellent investments in today's growth-focused market:
Market Vectors Biotech ETF (AMEX:BBH-Free Report)
This ETF tracks the Market Vectors US Listed Biotech 25 Index, a benchmark of
25 companies in the biotech sector. The fund charges a reasonable 35 basis
point fee per year, and sees decent volume on assets of about $300 million
(see Two Sector ETFs to Buy in 2013).
The ETF is heavily focused on large caps and growth stocks, as more than
two-thirds of the portfolio falls in the large cap category, while about 80%
is classified as growth. With this focus, it shouldn't be too surprising to
note that the ETF doesn't really pay anything in yield, and that it isn't an
income choice for investors.
In terms of holdings, large biotech firms take the top three spots and account
for about 36% of assets, suggesting a relatively heavy level of concentration.
Six other companies make up over 4% though, so there is a decent amount of
From a performance perspective, the ETF has been extremely solid, adding about
30% over the past six months. The fund is also up 55% from a one year look,
thoroughly crushing similar funds and the broad market in the time frame.
iShares Nasdaq Biotechnology ETF (Nasdaq:IBB-Free Report)
This fund follows the NASDAQ Biotechnology Index, a benchmark of about 120
companies involved in biomedical research. The ETF charges 48 basis points a
year in fees, and sees great volume on assets of just over $3 billion.
Growth stocks are once again a big part of this fund accounting for about 80%
of the total. However, large caps aren't as dominant here, accounting for just
over 50% of assets in IBB, leaving plenty for pint sized firms.
This fund's holdings profile is similar to BBH, as GILD, AMGN, and BIIB all
find their way into the top five. However, the top holding here is Regeneron
(Nasdaq:REGN-Free Report), while Celgene (Nasdaq:CELG-Free Report) also finds
its way into the fourth position at roughly 6.7% of assets (see Forget Big
Pharma It Is Time for a Biotech ETF).
In terms of performance, this ETF has also been a solid performer, adding a
whopping 30% over the past six months. The ETF has also done quite well in the
trailing one year time frame, gaining an impressive 44.9% in that period.
First Trust Amex Biotechnology Index Fund (AMEX:FBT-Free Report)
For an equal weight approach to investing in biotechnology, investors have FBT
a fund that tracks the Amex Biotechnology Index. Investors have to pay a bit
more for this equal weight exposure though, as costs come in at 60 basis
points a year, though volume and assets are still solid.
This approach also results in a bit of a value tilt, though growth stocks
still make up a majority of assets in this ETF. Additionally, large caps make
up just 40% of the fund, so there is definitely a tilt towards small companies
that could be excellent takeover targets.
Beyond noting that each stock makes up roughly the same proportion in this
ETF, investors should also note that just 20 stocks are in FBT's basket. So,
on average, each company will only make up about 5% of the total, though this
can fluctuate in between rebalancing dates.
This has been the worst of the three in terms of performance, but it has still
beaten out broad benchmarks, adding about 27.5% in the past six months. Longer
term the performance has also been shakier, adding 'just' 37%, though its
focus on smaller securities could help it outperform if an M&A wave hits the
biotech world (see Food ETFs in Focus on Deal Wave).
Biotechnology ETFs have had a pretty solid run over the past few months,
outpacing broad markets, and the health care sector in general as well. Given
the current trend in the market towards high growth sectors and away from
dividends, these firms could certainly continue their recent run and move
higher in the summer months.
This could be especially true given the decent industry rank for this segment,
how well the sector is positioned for Obamacare implementation, and the many
M&A opportunities in this corner of the investing world. So, if you are
looking for high growth, high momentum play, any of the aforementioned biotech
ETFs could definitely be a solid pick for the weeks and months ahead.
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