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Should You Invest in the Invesco Dynamic Biotechnology & Genome ETF (PBE)?

Zacks Equity Research
BancorpSouth (BXS) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.
BancorpSouth (BXS) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

Looking for broad exposure to the Healthcare - Biotech segment of the equity market? You should consider the Invesco Dynamic Biotechnology & Genome ETF (PBE), a passively managed exchange traded fund launched on 06/23/2005.

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Healthcare - Biotech is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 3, placing it in top 19%.

Index Details

The fund is sponsored by Invesco. It has amassed assets over $299.25 M, making it one of the average sized ETFs attempting to match the performance of the Healthcare - Biotech segment of the equity market. PBE seeks to match the performance of the Dynamic Biotechnology & Genome Intellidex Index before fees and expenses.

This is comprised of stocks of 30 U.S. biotechnology and genome companies. These are companies that are principally engaged in the research, development, manufacture and marketing and distribution of various biotechnological products, services and processes and companies that benefit significantly from scientific and technological advances in biotechnology and genetic engineering and research.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.58%, making it one of the more expensive products in the space.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Healthcare sector--about 100% of the portfolio.

Looking at individual holdings, Amgen Inc (AMGN) accounts for about 5.40% of total assets, followed by Vertex Pharmaceuticals Inc (VRTX) and Illumina Inc (ILMN).

The top 10 holdings account for about 47.16% of total assets under management.

Performance and Risk

The ETF has added roughly 18.61% so far this year and was up about 10.07% in the last one year (as of 10/08/2018). In that past 52-week period, it has traded between $43.83 and $60.27.

The ETF has a beta of 1.35 and standard deviation of 25.91% for the trailing three-year period, making it a high risk choice in the space. With about 30 holdings, it has more concentrated exposure than peers.

Alternatives

Invesco Dynamic Biotechnology & Genome ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, PBE is a reasonable option for those seeking exposure to the Health Care ETFs area of the market. Investors might also want to consider some other ETF options in the space.

SPDR S&P Biotech ETF (XBI) tracks S&P Biotechnology Select Industry Index and the iShares Nasdaq Biotechnology ETF (IBB) tracks Nasdaq Biotechnology Index. SPDR S&P Biotech ETF has $5.02 B in assets, iShares Nasdaq Biotechnology ETF has $9.21 B. XBI has an expense ratio of 0.35% and IBB charges 0.47%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
PWRSH-DYN BIO (PBE): ETF Research Reports
 
ISHARES NDQ BIO (IBB): ETF Research Reports
 
SPDR-SP BIOTECH (XBI): ETF Research Reports
 
Illumina, Inc. (ILMN) : Free Stock Analysis Report
 
Vertex Pharmaceuticals Incorporated (VRTX) : Free Stock Analysis Report
 
Amgen Inc. (AMGN) : Free Stock Analysis Report
 
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