Best Biotech ETFs for Q2 2022

0
9


Biotech companies use or modify biological processes to create new pharmaceuticals or therapies. Some of the most prominent biotech companies include Vertex Pharmaceuticals Inc. (VRTX) and Regeneron Pharmaceuticals Inc. (REGN).

Investing in the biotech sector can be risky. The scientific and regulatory issues involved with gaining approval from the U.S. Food and Drug Administration (FDA) can be substantial, making it risky and difficult to predict which biotech stocks will outperform.

One of the easiest ways to invest in the sector is through biotech exchange-traded funds (ETFs). These funds have holdings in a large array of biotech companies, offering investors a well-diversified portfolio in one easy-to-execute trade.

Key Takeaways

  • The biotech sector dramatically underperformed the broader market over the past year.
  • The biotech exchange-traded funds (ETFs) with the best one-year trailing total returns are FBT, BBH, and IBB.
  • The top holding of the first of these ETFs is ACADIA Pharmaceuticals Inc., and the top holding of each of the second and third funds is Amgen Inc.

There are 10 biotech ETFs that trade in the U.S., excluding inverse and leveraged ETFs as well as funds with less than $50 million in assets under management (AUM). The biotech sector, as measured by the Nasdaq Biotechnology Index, has dramatically underperformed the broader market with a total return of -22.2% over the past 12 months compared with the S&P 500’s total return of 15.2%, as of Feb. 15, 2022. The best-performing biotech ETF, based on performance over the past year, is the First Trust NYSE Arca Biotechnology Index Fund (FBT). We examine the top three biotech ETFs below. All numbers are as of Feb. 15, 2022.

  • Performance Over One-Year: -16.6%
  • Expense Ratio: 0.55%
  • Annual Dividend Yield: N/A
  • Three-Month Average Daily Volume: 59,839
  • Assets Under Management: $1.5 billion
  • Inception Date: June 19, 2006
  • Issuer: First Trust

FBT aims to track the NYSE Arca Biotechnology Index, an equal-dollar-weighted index designed to gauge the performance of biotech companies primarily involved in the use of biological processes to develop products or offer services. The ETF is focused on a narrow segment of the healthcare industry, providing exposure to biotech companies that use biological processes, such as recombinant DNA technology, molecular biology, genetic engineering, and genomics to develop medicines and therapies. The fund invests in primarily growth stocks of various market capitalizations. Its top three holdings are ACADIA Pharmaceuticals Inc. (ACAD), a biopharmaceutical company focused on developing medicines for central nervous system disorders; Sarepta Therapeutics Inc. (SRPT), a clinical-stage biopharmaceutical company focused on the development of RNA-based therapeutics for the treatment of rare and infectious diseases; and Neurocrine Biosciences Inc. (NBIX), a neuroscience-focused biopharmaceutical company.

  • Performance Over One-Year: -18.1%
  • Expense Ratio: 0.35%
  • Annual Dividend Yield: 0.32%
  • Three-Month Average Daily Volume: 26,861
  • Assets Under Management: $465.1 million
  • Inception Date: Dec. 20, 2011
  • Issuer: VanEck

BBH aims to track the MVIS U.S. Listed Biotech 25 Index, which is designed to measure the performance of companies involved in the development and production of drugs based on genetic analysis and diagnostic equipment. The market-cap weighted ETF offers targeted exposure to the biotech industry. It is primarily focused on U.S.-based companies, but allocates some of its holdings to biotech companies located in certain European countries and China. The fund primarily invests in growth stocks of companies with various market caps. Its top three holdings are Amgen Inc. (AMGN), a biotechnology company that develops and manufactures various human therapeutics; Gilead Sciences Inc. (GILD), a biopharmaceutical company focused on advancing medicines to prevent and treat diseases such as HIV, viral hepatitis, and cancer; and Vertex Pharmaceuticals, a biotech company focused on developing therapies for treating serious and genetic diseases, such as cystic fibrosis.

  • Performance Over One-Year: -23.7%
  • Expense Ratio: 0.45%
  • Annual Dividend Yield: 0.22%
  • Three-Month Average Daily Volume: 2,754,692
  • Assets Under Management: $8.4 billion
  • Inception Date: Feb. 5, 2001
  • Issuer: BlackRock Financial Management

IBB seeks to track the ICE Biotechnology Index, which gauges the performance of U.S.-listed equities within the biotech sector. The ETF provides targeted access to biotech companies primarily based in the U.S., though it does include some international firms, providing some geographical diversification. The types of stocks within the fund are those that are poised to do well on technological breakthroughs and increased investment in medical processes. IBB is primarily focused on growth stocks of various market caps. Its top three holdings are Amgen; Gilead Sciences; and Regeneron Pharmaceuticals, a biotech company that develops and manufactures medicines for the treatment of cancer and other diseases.



Source link