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 /PRNewswire/ — Today, Zacks Investment Ideas
feature highlights Features: Market Vectors
short for biotechnology
See exchange-traded fund (ETF).
BBH Bartle, Bogle, Hegarty
BBH Bouncing Busy Hour
BBH Blueback Herring
Report ), iShares Nasdaq Biotechnology ETF (Nasdaq:
IBB Institute of Biochemistry and Biophysics
IBB Islamic Bank of Britain
IBB I’ll Be Back
IBB Intentional Base on Balls
-Free Report ),
Regeneron (Nasdaq: REGN-Free Report ), Celgene (Nasdaq: CELG-Free
Report) and First Trust Amex Biotechnology Index Fund (AMEX:
FBT Floridians for Better Transportation
FBT Fire Boat
FBT Functional Board Test
FBT Feedback Technology
FBT Fruit Basket Turnover
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
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 bad idea.
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 Economy).
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
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
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 diversification.
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
. 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,
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
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
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
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
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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