Where Can Investors Find Value In Healthcare ETFs With The Industry All Over The Map

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March 9, 2010 4:56pm NYSE:BBH NYSE:FBT

“The health-care sector has been all over the map this year, with some investors seeing it as a safe bet during a recession and others shying away from the uncertainty caused by potential


 health-care reform in the US. Now that President Barack Obama and Congress have made it clear that they can’t agree on anything, many investors are looking at where they can find some good value in these stocks. Exchange-traded funds have carved up the sector relatively well, offering investors everything from a broad view with the Vanguard Health Care ETF (VHT), which gives investors a pretty good mix of large-, medium-, and small-cap stocks, to more niche offerings like PowerShares Dynamic Healthcare Services (PTJ), with top holdings in WellPoint (WLP), Humana (HUM), and UnitedHealth (UNH),” Lisa LaMotta Reports From Minyanville.

Morningstar analyst John Gabriel recommends knowing what you own when investing in ETFs, he says “the industry breakdowns can vary widely from fund to fund.” He suggests taking a look at the fund by how it breaks down into various industries (i.e. pharmaceuticals, biotechs, medical devices, and service providers). He also suggests looking at what percentage of the fund is exposed to large caps, mid caps, and small caps.

LaMotta goes on to say, “Another important factor when investing in ETFs is to look at how many companies are included in the fund this will give you a better idea of how deeply rooted the fund is in each company or if it only has shallow exposure to each of its holdings.”

“Despite ETFs covering the same sector, their holdings and thus their performance can vary widely. ETF Database senior analyst Michael Johnston looked at the differences in five biotech ETFs in a recent article from the site. He points out First Trust Biotech ETF (FBT) is up 24.4% year-to-date compared with Biotech HOLDRS (BBH), up only 6.4%. The difference comes from some of the funds’ major holdings FBT has a good portion of its holdings in Sequenom (SQNM), OSI Pharmaceuticals (OSIP), Millipore (MIL), and InterMune (ITMN), which have all been major gainers this year while BBH has no exposure to any of these stocks,” LaMotta Reports.

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Here are some details on the Healthcare ETFs in the article below:

The investment (VHT) seeks to track the performance of a benchmark index that measures the investment return of health care stocks. The fund employs a passive management investment approach designed to track the performance of the MSCI U.S. Investable Market Health Care Index. This index consists of all capitalization of stocks within the health care sector. This sector industry includes companies that manufacture health care equipment and supplies or provide health care related services. It is non diversified.

TOP 10 HOLDINGS ( 48.75% OF TOTAL ASSETS)  
 
Company Symbol % Assets
Abbott Laboratories Common Stoc (ABT) 5.16
Amgen Inc. (AMGN) 4.12
Bristol-Myers Squibb Company Co (BMY) 3.01
Gilead Sciences, Inc. (GILD) 2.85
Johnson & Johnson Common Stock (JNJ) 11.32
Medtronic Inc. Common Stock (MDT) 2.78
MERCK & CO INC N/A 4.5
Pfizer, Inc. Common Stock (PFE) 7.54
SCHERING PLOUGH CORP (SGP) 3.1
Wyeth (WYE) 4.37

Chart for Vanguard Health Care ETF (VHT)

The investment (PTJ) seeks results that correspond to the price and yield performance, before fees and expenses, of the Dynamic Healthcare Services Intellidex index. The fund normally invests at least 80% of assets in common stocks of healthcare services companies. It may invest at least 90% of assets in common stocks that comprise the index. The index consists of approximately 30 U.S. healthcare services companies. These are companies that are principally engaged in the delivery, support or financing of healthcare. The fund is nondiversified.

TOP 10 HOLDINGS ( 44.67% OF TOTAL ASSETS)  
 
Company Symbol % Assets
Amedisys Inc (AMED) 3.21
AmerisourceBergen Corporation ( (ABC) 4.85
Cardinal Health, Inc. Common St (CAH) 4.66
Humana Inc. Common Stock (HUM) 4.87
Kindred Healthcare, Inc. Common (KND) 3.18
Laboratory Corporation of Ameri (LH) 4.73
McKesson Corporation Common Sto (MCK) 4.61
Quest Diagnostics Incorporated (DGX) 4.8
UnitedHealth Group Incorporated (UNH) 4.79
WellPoint, Inc. Common Stock (WLP) 4.97

Chart for PowerShares Dynamic Healthcare Services (PTJ)

The investment (FBT) seeks investment results that correspond generally to the price and yield (before the fund’s fees and expenses) of an equity index called the NYSE Arca Biotechnology Index. The fund normally invests at least 90% of assets in stocks that comprise the index. The index measures the performance of a cross section of companies in the biotechnology industry that are primarily involved in the use of biological processes to develop products or provide services. The fund is nondiversified.

TOP 10 HOLDINGS ( 55.93% OF TOTAL ASSETS)  
 
Company Symbol % Assets
Alexion Pharmaceuticals, Inc. (ALXN) 5.26
Amylin Pharmaceuticals, Inc. (AMLN) 4.87
Biogen Idec Inc (BIIB) 5.39
Celera Corporation (CRA) 5.14
Celgene Corporation (CELG) 4.89
Cephalon, Inc. (CEPH) 5.69
Human Genome Sciences, Inc. (HGSI) 7.6
Life Technologies Corporation (LIFE) 5.32
Sequenom, Inc. (SQNM) 5.67
Vertex Pharmaceuticals Incorpor (VRTX) 6.1

Chart for First Trust NYSE Arca Biotech Index (FBT)

The investment (BBH) seeks to diversify your investment in the biotechnology industry through a single, exchange listed instrument representing your undivided beneficial ownership of the underlying securities. The trust holds securities traded on U.S. stock markets that, when initially selected, were issued by companies involved in the biotechnology industry. Except when a reconstitution event, distribution of securities by an underlying issuer or other event occurs, the group of companies will not change. There are currently 18 companies included in the Bio-tech HOLDRS.

TOP 10 HOLDINGS ( 99.51% OF TOTAL ASSETS)  
 
Company Symbol % Assets
Alkermes, Inc. (ALKS) 0.39
Amgen Inc. (AMGN) 37.34
Biogen Idec Inc (BIIB) 14.66
Celera Corporation (CRA) 0.28
Enzon Pharmaceuticals, Inc. (ENZN) 0.32
Genzyme Corporation (GENZ) 6.97
Gilead Sciences, Inc. (GILD) 28.12
Human Genome Sciences, Inc. (HGSI) 2.49
Life Technologies Corporation (LIFE) 4.77
SHIRE LTD (SHP) 4.17

 Chart for Biotech HOLDRs (BBH)


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