Market Overview

Meet This Year's Best Healthcare ETF

Meet This Year's Best Healthcare ETF
Related XHE
This Healthcare ETF Continues Beating Higher
Surprisingly, Politicians Could Boost Medical Device ETFs

As has been widely documented, the healthcare sector, the S&P 500's third-largest sector weight, is struggling this year. The Health Care SPDR (ETF) (NYSE: XLV), the largest healthcare exchange-traded fund by assets, is down nearly 4 percent this year and is in position to notch its first annual decline since 2008.

There have been pockets of strength with the healthcare sector, notably from healthcare equipment and medical device manufacturers. Just look at the SPDR Series Trust (NYSE: XHE). XHE is up nearly 12 percent year-to-date, making it this year's best-performing non-leveraged healthcare ETF.


XHE holds 71 stocks with a weighted average market value of $10.6 billion, putting the ETF squarely in mid-cap territory. That makes XHE significantly different than its chief competitor, the iShares Dow Jones US Medical Dev.(ETF) (NYSE: IHI), which holds 52 stocks. IHI is a cap-weighted fund, while XHE uses an equal-weight methodology.

Not surprisingly, that leads to diverging returns, as XHE is outpacing IHI by more than 200 basis points this year. Over the past three years, XHE has trailed IHI while being slightly more volatile. About 74.5 percent of XHE's holdings are considered healthcare equipment makers while the remainder of the ETF's lineup is classified as makers of healthcare supplies.

Politics And Healthcare

As has been duly noted throughout the course of this presidential election, rhetoric from both parties concerning high pharmaceuticals prices has been a drag on the healthcare sector and for biotechnology stocks in particular.

Unfortunately, healthcare leaders have recently retreated. For example, medical device makers have been the strongest part of the healthcare sector this year, but have recently tumbled. XLV allocates over 23 percent of its weight to healthcare equipment makers and life sciences tools manufacturers.

Politics are also at play for ETFs such as XHE and IHI, but in a more positive way.

““When the Affordable Care Act (ACA), also known as Obamacare, was passed in 2010, the legislation include a tax on medical device companies, including those found in IHI. It is widely expected that the Trump Administration will work to repeal that tax and do swiftly,” according to InvestorPlace.

Posted-In: Long Ideas News Sector ETFs Health Care Politics Markets Trading Ideas ETFs Best of Benzinga


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