3 Healthcare ETFs Riding High – FBT, RYH, IHE
One of the most controversial things to come out of Washington DC under President Obama is the Affordable Care Act known as Obamacare.
The change it has brought to our nation’s healthcare system has been political fodder for people on both sides of the aisle.
Well, the debate is heating up again after the Supreme Court announced they will hear a case that could change a key piece of the legislation.
The law says that people who need tax credits to help pay for their health insurance premiums can receive them if they purchase insurance on an exchange established by the state.
The thing is only 13 states have their own exchanges. If you don’t live in one of these states, the insurance is bought on the site run by the federal government… healthcare.gov.
This was the same site that was the center of the controversy last year. Back then the problem was the site didn’t work… only six people were able to sign up for insurance on the first day the government run website opened for business.
Essentially the lawsuit says that people who sign up on the federal site shouldn’t get any tax credits because it wasn’t established by a state. This seems to be a technicality but there’s a chance people who signed up for health insurance on the healthcare.gov website will lose their tax credits.
Despite the controversy and the problems with the law, there’s no denying that it has had a positive impact on healthcare stocks.
In fact, healthcare stocks are the top performing sector in the S&P 500 this year. The Healthcare Select Sector SPDR (XLV) is up more than 25% this year.
But that’s not even close to the top performing ETF in sector. Let’s take a look at three of the top performing healthcare ETFs.
First Trust NYSE Arca Biotechnology Index Fund (FBT)
FBT is one of the top performing healthcare ETFs this year. It’s up 42% year-to-date. It’s currently trading for $99.14.
This fund focuses on stocks that are in the biotechnology industry. It currently holds 31 stocks. Each stock is given an equal weighting in FBT. And it carries an expense ratio of 0.60%.
Needless to say, biotech stocks have been one of the hottest areas of the market this year.
S&P Equal Weight Health Care ETF (RYH)
RYH has also outperformed XLV this year. So far this year, it’s up 28% to $140.06 per share.
This ETF holds the same stocks as XLV but it weights every stock equally instead of by market cap. It currently holds 57 stocks and has an expense ratio of 0.40%.
This ETF is a clear indication of how the weighting methodology can translate into over/under performance of an individual ETF. The equal weighting methodology has worked in RYH’s favor this year.
iShares US Pharmaceuticals ETF (IHE)
IHE is another healthcare ETF performing well this year. The 27% gain so far this year is outperforming XLV by 2%.
This ETF is composed of 42 stocks that fall into the pharmaceutical industry inside the healthcare sector. It has an expense ratio of 0.46%.
Big pharma stocks had a great third quarter earnings season. Several of the largest drug makers beat earnings expectations and gave upbeat guidance about the future.
Here’s the upshot…
Obamacare continues to be a lightning rod for political controversy. But the stock market is ignoring the noise and focusing on the positive impact the law is having on corporate profits.
If you don’t have exposure to healthcare stocks, you’ve missed out on the hottest sector of the year. But it’s not too late… these ETFs will continue to benefit from positive trends that should lift healthcare ETFs to new highs.
Good Investing,
Corey Williams
Category: ETFs
