Five Biotech ETFs, Which One Is Worth A Look?

Believe it or not there are actually more biotech ETFs available to U.S. investors than there are ETFs focusing on big pharma companies. The count is five to four, but we could probably live with fewer biotech choices.

The five biotech ETFs are the PowerShares Dynamic Biotech & Genome ETF (NYSE: PBE), the SPDR S&P Biotech (NYSE: XBI), iShares Nasdaq Biotechnology ETF (Nasdaq: IBB), the Biotech HOLDRs (AMEX: BBH) and the First Trust NYSE Arca Biotech Index (NYSE: FBT).

Of this group, only IBB and XBI have average daily volume that is over 100,000 shares and IBB's average daily trade is nearly triple that of XBI.

Taking a broader perspective, biotech is a sector investors should want some exposure to. FDA approvals and increased M&A activity make the sector a compelling bet at this juncture. That said, investors cannot pick blindly among the biotech ETFs.

Take BBH off your list. As is the case with so many of the HOLDRs ETFs, BBH is heavily weighted to just two stocks. Amgen (Nasdaq: AMGN) and Gilead (Nasdaq: GILD) account for two-thirds of the ETF's weight.

Both stocks figure prominently in PBE, but to a much lesser extent. In addition, PBE features a nice mix of speculative names that could be of interest to investors willing to embrace some risk.

For the more conservative investor, IBB, the king of the group, represents the best bet. FBT may be worth a near-term look as it traded more than seven times its average daily volume on Tuesday.