12 Best Healthcare ETFs To Buy
In this article, we discuss 12 best healthcare ETFs. If you want to skip our discussion on the healthcare market, head directly to 5 Best Healthcare ETFs To Buy.
In December 2022, BlackRock highlighted concerns about the performance for the healthcare sector in 2023. The previous year was rather challenging for equity and fixed income markets. However, the healthcare sector has historically shown resilience during such times. For 2023, BlackRock expected a volatile market, given the inflationary pressure and other geopolitical uncertainty. As per expectations, the sector has exhibited uncertainty in 2023. Over the past two years, the industry has reached record highs in performance. This can be directly attributed to the industry’s effective response to COVID-19. In 2021, the healthcare sector contributed around 19% of the GDP for the United States, while the medical expense for a person amounted to roughly $13,000. BlackRock reported that revenues from COVID-19 are going to normalize over the next few years, as the world moves on from the pandemic. However, the industry presents a valuable opportunity for innovation in creating mRNA-based technologies to treat cancer, Alzheimer’s, and Parkinson’s. While the pandemic forced drastic changes for the medical sector worldwide, it highlighted the efficacy of telehealth, remote monitoring, and cloud-management services within the industry.
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LBMC, a professional services CPA firm, valued the telehealth market at $48.3 billion in 2022, and it is forecasted to reach $57.1 billion in 2023. Similarly, in 2021, the worldwide big data healthcare market was worth $32.9 billion, and it is anticipated to be valued at $105.73 billion by 2030, showing a compound annual growth rate (CAGR) of 13.85%. With the recent hype about artificial intelligence, companies are expected to innovate and integrate it into their cloud-based data management portals. The industry faces significant challenges despite the recent performance boost since Covid-19. Perhaps the biggest concern in the US market is the shortage of medical professionals. In addition, the rising levels of inflation would increase healthcare premiums. Currently, the consumer price index is at 3%. In comparison, this was 9.1% in June 2022. Although the Federal Reserve has managed to reduce inflation, the officially targeted rate is 2%. To add to this, many experts expect unemployment levels to rise over the next year. Collectively, unemployment and inflation are expected to increase the likelihood of a recession over the next 12 months.
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While the healthcare sector continues to normalize in the post-pandemic world, the sector remains set to innovate – be it treatments, workforce management solutions, medical devices, or better healthcare plans. This article discusses some of the best healthcare ETFs that provide investors with access to market leaders like Thermo Fisher Scientific Inc. (NYSE:TMO), UnitedHealth Group Incorporated (NYSE:UNH), and AbbVie Inc. (NYSE:ABBV).
Our Methodology
We used an ETF screener and filtered out the best performing healthcare ETFs based on 5-year share price performance. We have also discussed the top holdings of the ETFs to offer better insight to potential investors. These ETFs have amassed significant gains over the past 5 years. The list is ranked in ascending order of the 5-year share price performance of these healthcare ETFs as of September 4, 2023. We tried to mention each industry ETF from the healthcare sector in our list. To see the best biotech ETFs, click here.
Best Healthcare ETFs
12. Tema Oncology ETF (NASDAQ:CANC)
5 Year Performance as of September 4: 3.38%
Tema Oncology ETF (NASDAQ:CANC) is another actively-traded fund set out to achieve long-term growth through investments in companies within the field of oncology. Cancer remains the second leading cause of death around the world. Despite this, the sector is on the verge of a transformative era in therapeutics and diagnosis. Considerable advancements such as genetic sequencing are driving a surge in productivity. The increasing complexity of scientific breakthroughs, regulatory processes, and a rising number of investment prospects calls for specialized expertise to navigate this thrilling phase in human progress. This makes Tema Oncology ETF (NASDAQ:CANC) one of the best healthcare ETFs to buy. The fund was introduced in 2023, and has invested in 48 companies, while maintaining an expense ratio of 0.75%.
Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) dominates the portfolio of Tema Oncology ETF (NASDAQ:CANC). Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) focuses on the research, development, and commercialization for the treatment of disorders, such as neovascular glaucoma, cancer, and other degenerative diseases. On August 3, Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) reported a Q2 revenue of $3.16 billion, in addition to a non-GAAP EPS of $10. These figures surpassed Street expectations by $140 million and $0.34, respectively.
According to Insider Monkey’s second quarter database, 56 hedge funds were bullish on Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN), as opposed to 54 hedge funds from the last quarter.
In addition to Thermo Fisher Scientific Inc. (NYSE:TMO), UnitedHealth Group Incorporated (NYSE:UNH), and AbbVie Inc. (NYSE:ABBV), Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) is one of the best healthcare stocks to buy.
Bronte Capital made the following comment about Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN) in its Q3 2022 investor letter:
“There have been some bright spots in our long book. Regeneron Pharmaceuticals, Inc. (NASDAQ:REGN), a major position and a stock we wrote up in our June 2021 letter, has been one of the best performing stocks in the S&P 500 this year. Alas it has not been enough to offset some of our weaker stocks, let alone our overweight exposure to the UK (and Europe) which have suffered from both stock and currency weakness. We do not think we are bad at picking stocks on the long side and hope – reasonably we think – for better relative results in the future. Prior to COVID, our longs were markedly better than the index. Unfortunately, if you look at our long book this quarter and since the onset of the COVID pandemic, there is scant evidence that we have added any value by picking stocks to go long.”
11. iShares Biotechnology ETF (NASDAQ:IBB)
5 Year Performance as of September 4: 10.42%
iShares Biotechnology ETF (NASDAQ:IBB) aims to mimic the performance of the ICE Biotechnology Index, which consists of biotechnology sector equities listed in the United States. The fund was first introduced in February 2001. As of September 1, it manages total assets worth $7.6 billion, while featuring an expense ratio of 0.45%.
Amgen Inc. (NASDAQ:AMGN) stands out in the holdings for iShares Biotechnology ETF (NASDAQ:IBB). Amgen Inc. (NASDAQ:AMGN) specializes in the research and development of medical treatments for issues in inflammation, oncology, bone health, cardiovascular disease, nephrology, and neuroscience. On August 3, Amgen Inc. (NASDAQ:AMGN) announced a Q2 revenue of $6.98 billion and a non-GAAP EPS of $5.00, exceeding expectations by $300 million and $0.51, respectively.
According to Insider Monkey’s second quarter database, a total of 57 hedge funds were bullish on Amgen Inc. (NASDAQ:AMGN) - this number remained unchanged from the last quarter.
Here is what Smead Capital Management has to say about Amgen Inc. (NASDAQ:AMGN) in its Q3 2022 investor letter:
“Two things are very noticeable right off the top. First, sometimes you have to be happy losing less in a bear market environment so that you have more of your capital to grow in the next bull market. We are never really happy losing money. Second, 2022 is likely to be our third year of existence as a fund to lose money for the year. This year would join 2008 and 2018 in this undistinguished category. Our biggest detractors were dominated by Amgen (NASDAQ:AMGN). Consumer/investor fears about media and e-commerce hit WBD and EBAY and profit taking in Amgen came from early 2022 strength.”
10. Fidelity Select Medical Technology and Devices Portfolio (NASDAQ:FSMEX)
5 Year Performance as of September 4: 14.80%
Fidelity Select Medical Technology and Devices Portfolio (NASDAQ:FSMEX) primarily invests in companies involved in activities like research, development, manufacturing, distribution, supply, or sale of medical equipment, devices, and associated technologies. This ETF was introduced on April 28, 1998. As of the conclusion of August 2023, the net assets of the Fidelity Select Medical Technology and Devices Portfolio (NASDAQ:FSMEX) reached close to $6.5 billion, with an expense ratio of 0.70%. It is one of the best healthcare ETFs to invest in.
Danaher Corporation (NYSE:DHR) is one of the top holdings of Fidelity Select Medical Technology and Devices Portfolio (NASDAQ:FSMEX). Danaher Corporation (NYSE:DHR) is a global company that creates, produces, and sells a range of professional, medical, industrial, and commercial products and services. According to Insider Monkey's Q2 data, Danaher Corporation (NYSE:DHR) was part of 89 hedge fund portfolios, compared to 90 in the preceding quarter. Andreas Halvorsen's Viking Global is the leading position holder in the company, with 4.25 million shares worth just over $1 billion.
Third Point Management made the following comment about Danaher Corporation (NYSE:DHR) in its second quarter 2023 investor letter:
“Danaher Corporation (NYSE:DHR) is our longest held investment and remains a top five position. Danaher has underperformed the S&P 500 this year due to a slowdown in the bioprocessing industry and more cautious spending by biopharma customers. Bioprocessing is a key end-market that drives more than a quarter of Danaher’s profits. Bioprocessing products are the main inputs that biopharma companies use to manufacture biologic drugs, which are the fastest growing category of drugs, growing low-to-mid-teens and representing a sizeable portion of the clinical pipeline.
The bioprocessing industry experienced significant growth in 2021 and 2022, driven by Covid vaccines and a strong biotech funding environment. Several participants, including Danaher, lowered their 2023 growth outlook in large part due to customer inventory de-stocking and biotech funding weakness. We anticipate that this slowdown is temporary, and the bioprocessing industry will return to normalized growth of high-single digit to mid-teens in 2024 and beyond.…” (Click here to read the full text)
9. First Trust Nasdaq Pharmaceuticals ETF (NASDAQ:FTXH)
5 Year Performance as of September 4: 15.75%
First Trust Nasdaq Pharmaceuticals ETF (NASDAQ:FTXH) targets investment outcomes that mimic those of the Nasdaq US Smart Pharmaceutical Index. Launched in September 2016, First Trust Nasdaq Pharmaceuticals ETF (NASDAQ:FTXH)’s portfolio holds 45 stocks, with net assets worth $22.9 million. Currently, the ETF features an expense ratio of 0.60%. It is one of the best healthcare ETFs to invest in.
Johnson & Johnson (NYSE:JNJ) is the largest holding of First Trust Nasdaq Pharmaceuticals ETF (NASDAQ:FTXH). Johnson & Johnson (NYSE:JNJ) is a market leader in consumer healthcare products around the world. On July 20, the company announced a Q2 revenue of $25.53 billion and a non-GAAP EPS of $2.80, surpassing the market estimates by $860 million and $0.18, respectively.
According to Insider Monkey’s second quarter database, a total of 88 hedge funds were bullish on Johnson & Johnson (NYSE:JNJ). This number increased from 86 in the last quarter.
ClearBridge Large Cap Value Strategy said this about Johnson & Johnson (NYSE:JNJ) in its first quarter 2023 investor letter:
“The tech-dominated quarter was a headwind for both defensive and cyclical sectors, with shares of health care holdings such as UnitedHealth Group (UNH), Elevance (ELV) and Johnson & Johnson (NYSE:JNJ) declining after a strong 2022.”
8. Invesco Dorsey Wright Healthcare Momentum ETF (NASDAQ:PTH)
5 Year Performance as of September 4: 16.29%
Launched in October 2006, Invesco Dorsey Wright Healthcare Momentum ETF (NASDAQ:PTH) tracks the performance for the Dorsey Wright Healthcare Technical Leaders Index. Usually, the ETF invests a minimum of 90% of its total assets in the securities that constitute the Index. The Dorsey Wright Healthcare Technical Leaders Index includes a minimum of 30 securities sourced from the NASDAQ US Benchmark Index. Like the index, the ETF undergoes quarterly rebalancing and reconstitution. As of August 31, the ETF maintains a net expense ratio of 0.60%. Invesco Dorsey Wright Healthcare Momentum ETF (NASDAQ:PTH) is one of the top healthcare ETFs to monitor.
IDEXX Laboratories, Inc. (NASDAQ:IDXX) is a significant holding of Invesco Dorsey Wright Healthcare Momentum ETF (NASDAQ:PTH). IDEXX Laboratories, Inc. (NASDAQ:IDXX) specializes in the manufacture of veterinary products under three segments – Companion Animal Group, Water Quality Products, and Livestock, Poultry and Dairy. On August 1, the company reported a Q2 revenue of $943.6 million and a non-GAAP EPS of $2.70, exceeding the market consensus by $9.58 million and $0.23, respectively.
According to Insider Monkey’s second quarter database, a total of 43 hedge funds had invested in IDEXX Laboratories, Inc. (NASDAQ:IDXX). In comparison, 47 hedge funds were bullish on the stock during the last quarter.
Baron Small Cap Fund said this about IDEXX Laboratories, Inc. (NASDAQ:IDXX) in its second quarter 2023 investor letter:
“We have had some extraordinary winners over time. For instance, we bought DexCom, Inc. at a $950 million market cap in 2012, and it is now valued at $50 billion (the stock has appreciated 41% annually since the Fund’s initial purchase). TransDigm Group Incorporated has grown from $1.1 billion at purchase to $49 billion presently (and the stock has appreciated 29% annually since the Fund’s initial purchase 17 years ago). IDEXX Laboratories, Inc. (NASDAQ:IDXX) has gone from $2 billion at purchase to $42 billion over almost 15 years and the stock has appreciated 26% annually during that time frame. The Trade Desk is now valued at $38 billion and was $433 million when we first purchased shares over 6 years ago. The stock has appreciated almost 60% annually since our initial purchase. Pretty amazing. All four stocks have been solid performers this year, contributing nicely to the Fund’s returns.”
7. Global X Aging Population ETF (NASDAQ:AGNG)
5 Year Performance as of September 4: 25.74%
Introduced in May 2016, Global X Aging Population ETF (NASDAQ:AGNG) aims to invest in companies that focus on the expanding elderly demographic worldwide. Through its portfolio, the ETF has exposure to sectors like healthcare, pharmaceuticals, and senior living facilities. As of September 1, the ETF holds net assets valued at $54.2 million and has an expense ratio of 0.50%.
Alcon Inc. (NYSE:ALC) is a prominent stock in Global X Aging Population ETF (NASDAQ:AGNG)’s portfolio. Alcon Inc. (NYSE:ALC) specializes in the development, manufacture, and distribution of eye-care products worldwide. On August 15, the company announced a Q2 revenue of $2.4 billion, along with a non-GAAP EPS of $0.69 – outperforming the Wall Street consensus by $20 million and $0.04, respectively.
According to Insider Monkey’s second quarter database, 25 hedge funds were bullish on Alcon Inc. (NYSE:ALC), as opposed to 30 hedge funds during the preceding quarter.
Madison Investors Fund said this about Alcon Inc. (NYSE:ALC) in its second quarter 2023 investor letter:
“In the second quarter, the top five contributors to performance were Alphabet, Copart, Alcon Inc. (NYSE:ALC), Parker-Hannifin, and PACCAR. Alcon continues to deliver above-market growth, driven by new product launches in contact lenses and a strong line-up in surgical products. Alcon’s superior innovation is really shining through, as are the operational and governance benefits of separating from Novartis. In addition, the eye surgery end market is steadily recovering from the Covid-triggered pauses in procedures.”
6. VanEck Biotech ETF (NASDAQ:BBH)
5 Year Performance as of September 4: 26.12%
VanEck Biotech ETF (NASDAQ:BBH) was launched in December 2011 with the goal of closely mirroring the performance of the MVIS® US Listed Biotech 25, which monitors the overall performance of companies engaged in activities related to genetic drug development and diagnostic equipment manufacturing. As of September 1, the ETF holds total net assets worth $485.5 million, while featuring an expense ratio of 0.35%. VanEck Biotech ETF (NASDAQ:BBH) is one of the best healthcare ETFs to invest in.
Gilead Sciences, Inc. (NASDAQ:GILD) is a prominent holding of VanEck Biotech ETF (NASDAQ:BBH). Gilead Sciences, Inc. (NASDAQ:GILD) engages in the research, development, commercialization, and distribution of medical therapies for rare disorders. On August 3, Gilead Sciences, Inc. (NASDAQ:GILD) reported a Q2 revenue of $6.59 billion and a non-GAAP EPS of $1.34. While the revenue outperformed estimates by $140 million, the EPS fell short of the Street consensus by $0.30.
According to Insider Monkey’s second quarter database, 56 hedge funds were bullish on Gilead Sciences, Inc. (NASDAQ:GILD), as opposed to 60 from the previous quarter. Like Thermo Fisher Scientific Inc. (NYSE:TMO), UnitedHealth Group Incorporated (NYSE:UNH), and AbbVie Inc. (NYSE:ABBV), Gilead Sciences, Inc. (NASDAQ:GILD) is one of the top healthcare stocks to buy.
Ariel Global Strategy said this about Gilead Sciences, Inc. (NASDAQ:GILD) in its Q4 2022 investor letter:
“Biopharmaceutical company Gilead Sciences, Inc. (NASDAQ:GILD. advanced in the quarter on positive data released in a study evaluating Trodelvy versus comparative chemotherapy in patients with metastatic breast cancer. The detailed findings increased investor confidence the drug would receive incremental approvals for a broader range of breast cancer treatments. Shares also received a boost on news that the TAF patent portfolio for HIV drugs will be extended from the middle of this decade through the early 2030s, creating greater visibility into the company’s long-term opportunity in the virology market.”
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Disclosure: None. 12 Best Healthcare ETFs To Buy is originally published on Insider Monkey.
