7 Biotech ETFs Getting Crushed By Valeant Stock

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October 28, 2015 3:17pm NYSE:GURU NYSE:PPH

biotechDiane Alter: Biotech ETFs have been the focus of many investors this week after Valeant Pharmaceuticals Intl. Inc. (NYSE:VRX) shares dropped more than 46% last week.


One biotech ETF with Valeant as a holding has slumped 8.4% in the past three months, as VRX stock continues to fall.

Biotech ETFS

Since August, shares of the drug giant – dubbed by short seller Citron Research as “pharma’s Enron” – have plunged 56%. Year to date, VRX stock is down 22.4%.

VRX shares slipped another 9% Monday morning. The slump came after a conference call with analysts defending the firm’s business and dealings failed to calm investors.

Fortunately for many investors, a number of biotech ETFs were able to weather the storm. That’s because Valeant isn’t part of the Nasdaq Biotechnology Index. So last week’s decline in the Valeant stock price didn’t impact ETFs that track the widely followed benchmark.

This is why investing in biotech ETFs is a good choice for investors looking for a safer way to enjoy biotech profits with lower risk than buying a biotech stock.

But Valeant’s recent drop is a stark reminder of why it’s important to know what’s in an ETF before making an investment.

Here are seven biotech ETFs that have been crushed by the Valeant stock price drop and three biotech ETFs that don’t invest in Valeant if you’re looking for another play…

7 Biotech ETFs Getting Crushed by Valeant Stock

The Vanguard FTSE All-World ex-US ETF (NYSE Arca: VEU) holds the largest dollar amount of Valeant shares with $12,787,329, or a 0.09% weighting. VEU shares are down 3.31% over the last three months and off 2.5% year to date.

The Market Vectors Pharmaceutical ETF (NYSE Arca: PPH) has a 2.35% Valeant weighting. Shares are off 0.32% over the last month and down 11.95% over the last three.

The PowerShares DWA Developed Markets Momentum ETF (NYSE Arca: PIZ) has a 1.3% Valeant weighting. Shares are off 4.23% over the last three months and down 3.75% year to date.

The Global X Funds ETF (NYSE Arca: GURU) has a 1.15% Valeant weighting. Shares are down 8.39% over the last three months and off 8.85% year to date.

The Guggenheim Insider ETF (NYSE Arca: NFO) has a 0.49% Valeant weighting. Shares are down 3.16% over the last three months and off 3.59% year to date.

The First Trust Value Line 100 Fund (NYSE: Arca: FVL) has a 0.46% Valeant weighting. Shares are off 4.17% over the last three months and down 3% year to date.

The Global X Guru Activist ETF (NYSE Arca: ACTX) has a 0.93% Valeant weighting. Launched in April, shares are down 6.05% over the last three months and off 11.05% since its inception.

Now here’s a look at biotech ETFs that don’t hold Valeant stock – and are all up for the year:

3 Top Biotech ETFs That Weathered the VRX Drop

The iShares Biotechnology ETF (NYSE Arca: IBB) has a market cap of $8.2 billion and 143 positions. The ETF’s holdings include pharma giants like Gilead Sciences Inc. (Nasdaq: GILD), Amgen Inc. (Nasdaq: AMGN), Celgene Corp. (Nasdaq: CELG), Regeneron Pharmaceuticals Inc. (Nasdaq: REGN), and Biogen Inc. (Nasdaq: BIIB). You won’t, however, find Valeant here. IBB ended last week with 0.6% gain. Year to date, IBB is up 6%.

The ProShares Ultra Nasdaq Biotechnology ETF (NYSE Arca: BIB) seeks daily investment results that correspond to two times the daily performance of the Nasdaq Biotechnology Index. As a Nasdaq Biotech Index tracking ETF, it also doesn’t hold Valeant. Shares ended last week with 0.7% gain. BIB is up 3.2% over the last month and 4.8% year to date.

The Health Care Select SPDR ETF (NYSE Arca: XLV) boasts a market cap of $13.33 billion. Its diversified portfolio includes drug goliaths Pfizer Inc. (NYSE:PFE), Johnson & Johnson (NYSE: JNJ), and Merck & Co. Inc. (NYSE: MRK). Large and small biotech firms are also among holdings. Shares ended last week nearly flat but are up 4.1% over the last month. XLV has gained 3.1% in 2015.

Money MorningWritten By Diane Alter From Money Morning

We’re in the midst of the greatest investing boom in almost 60 years. And rest assured – this boom is not about to end anytime soon. You see, the flattening of the world continues to spawn new markets worth trillions of dollars; new customers that measure in the billions; an insatiable global demand for basic resources that’s growing exponentially; and a technological revolution even in the most distant markets on the planet.And Money Morning is here to help investors profit handsomely on this seismic shift in the global economy. In fact, we believe this is where the only real fortunes will be made in the months and years to come.


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