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Should You Invest in the Invesco S&P SmallCap Health Care ETF (PSCH)?

Zacks Equity Research

Looking for broad exposure to the Healthcare - Broad segment of the equity market? You should consider the Invesco S&P SmallCap Health Care ETF (PSCH), a passively managed exchange traded fund launched on 04/07/2010.

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Healthcare - Broad 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 $454.88 M, making it one of the average sized ETFs attempting to match the performance of the Healthcare - Broad segment of the equity market. PSCH seeks to match the performance of the S&P SmallCap 600 Capped Health Care Index before fees and expenses.

This Index is comprised of common stocks of U.S. healthcare companies.These are companies that are principally engaged in the business of providing healthcare-related products & services, including biotechnology, pharmaceuticals, medical technology and supplies & facilities and this Index is a subset of the S&P SmallCap 600 Index.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.29%, making it one of the least expensive products in the space.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that 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, Arrowhead Pharmaceuticals Inc (ARWR) accounts for about 4.19% of total assets, followed by Medicines Co/the (MDCO) and Lhc Group Inc (LHCG).

The top 10 holdings account for about 33.07% of total assets under management.

Performance and Risk

The ETF return is roughly 9.88% and is down about -7.80% so far this year and in the past one year (as of 11/06/2019), respectively. PSCH has traded between $100.46 and $130.14 during this last 52-week period.

The ETF has a beta of 1.21 and standard deviation of 18.95% for the trailing three-year period, making it a high risk choice in the space. With about 76 holdings, it effectively diversifies company-specific risk.

Alternatives

Invesco S&P SmallCap Health Care 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, PSCH is a good 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.

Vanguard Health Care ETF (VHT) tracks MSCI US Investable Market Health Care 25/50 Index and the Health Care Select Sector SPDR Fund (XLV) tracks Health Care Select Sector Index. Vanguard Health Care ETF has $9.08 B in assets, Health Care Select Sector SPDR Fund has $17.96 B. VHT has an expense ratio of 0.10% and XLV charges 0.13%.

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.


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Invesco S&P SmallCap Health Care ETF (PSCH): ETF Research Reports
 
Health Care Select Sector SPDR Fund (XLV): ETF Research Reports
 
Vanguard Health Care ETF (VHT): ETF Research Reports
 
The Medicines Company (MDCO) : Free Stock Analysis Report
 
LHC Group, Inc. (LHCG) : Free Stock Analysis Report
 
Arrowhead Pharmaceuticals, Inc. (ARWR) : Free Stock Analysis Report
 
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