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Should You Invest in the SPDR SP Health Care Equipment ETF (XHE)?

Zacks Equity Research
·3 min read

Looking for broad exposure to the Healthcare - Medical Devices segment of the equity market? You should consider the SPDR SP Health Care Equipment ETF (XHE), a passively managed exchange traded fund launched on 01/26/2011.

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 - Medical Devices is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 13, placing it in bottom 19%.

Index Details

The fund is sponsored by State Street Global Advisors. It has amassed assets over $617.41 million, making it one of the average sized ETFs attempting to match the performance of the Healthcare - Medical Devices segment of the equity market. XHE seeks to match the performance of the S&P Health Care Equipment Select Industry Index before fees and expenses.

This Index represents the health care equipment and supplies sector of the S&P Total Market Index. The Index is one of nineteen S&P Select Industry Indices, each designed to measure the performance of a narrow sub-industry or group of sub-industries as defined by the GICS.The Health Care Index is a modified equal weight index.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. 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, Quidel Corporation (QDEL) accounts for about 2.07% of total assets, followed by Axonics Modulation Technologies Inc. (AXNX) and Varex Imaging Corporation (VREX).

The top 10 holdings account for about 16.62% of total assets under management.

Performance and Risk

So far this year, XHE has added about 19.74%, and is up about 27.80% in the last one year (as of 11/08/2020). During this past 52-week period, the fund has traded between $59.35 and $103.42.

The ETF has a beta of 1.03 and standard deviation of 24.36% for the trailing three-year period, making it a medium risk choice in the space. With about 77 holdings, it effectively diversifies company-specific risk.

Alternatives

SPDR SP Health Care Equipment 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, XHE 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.

IShares U.S. Medical Devices ETF (IHI) tracks Dow Jones U.S. Select Medical Equipment Index. The fund has $8.78 billion in assets. IHI has an expense ratio of 0.42%.

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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SPDR SP Health Care Equipment ETF (XHE): ETF Research Reports
 
Quidel Corporation (QDEL) : Free Stock Analysis Report
 
iShares U.S. Medical Devices ETF (IHI): ETF Research Reports
 
Varex Imaging Corporation (VREX) : Free Stock Analysis Report
 
Axonics Modulation Technologies, Inc. (AXNX) : Free Stock Analysis Report
 
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