The hot and the soaring biotechnology corner of the broad U.S. health care market endured a steep correction last week. In any case, the space has long been guilty of overvaluation; with even the Fed chair Yellen pointing to it last year. But investors seemed unaffected as the largest biotech ETF iShares Nasdaq Biotechnology (IBB) have added over 22% this year and gained about 50% in the last one-year frame.
However, the bubble had to burst sometime and last week we heard a loud popping noise. IBB was off about 4% and also saw about $522 million in asset outflow last week, per etf.com. Other biotech ETFs witnessed also witnessed a sharp sell-off with BioShares Biotechnology Clinical Trials Fund (BBC) shedding about 7.5%, Medical Breakthroughs ETF (SBIO) losing 6.2% and SPDR S&P Biotech ETF (XBI) retreating 6%.
Though this does not push the biotech space in an outright bear territory, as the area is full of possibilities, investors can take a look at some health care ETFs that bypassed last week’s biotech sell-off.
After all, the sector has no dearth of drivers. The merger and acquisition frenzy, encouraging industry fundamentals, promising new drugs, growing demand in emerging markets, ever-increasing health care spending and Obama care play major roles to make it a lucrative bet for the long term.
These health care ETFs are all Buy-rated, and were in positive territory last week overruling the biotech correction and could be in watch in the short term, at least until the penchant for biotech investing returns. Investors should note that apart from the trio, the entire health care space was under pressure last week.
PowerShares S&P SmallCap Health Care Portfolio (NASDAQ:PSCH)
This ETF delivered spectacular performance in the broad health care world, returning nearly 24% so far this year and was up 1.14% over the last five trading sessions (as of August 10, 2015). The fund offers concentrated exposure to small cap health care securities. It holds 73 securities in its basket, with each security holding less than 3.93% share. From an industry perspective, about one-third of the portfolio is allotted toward health care equipment and supplies, followed by health care providers and services (28.3%) and pharmaceuticals (15.7%).
The ETF has amassed $253 million in asset and trades in lower volume of about 25,000 shares per day, while charging a relatively low fee of 29 bps a year. The fund has an ETF Rank #1 (Strong Buy) with a High risk outlook.