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Should You Invest in the SPDR SP Pharmaceuticals ETF (XPH)?

Zacks Equity Research

The SPDR SP Pharmaceuticals ETF (XPH) was launched on 06/19/2006, and is a passively managed exchange traded fund designed to offer broad exposure to the Healthcare - Pharma segment of the equity market.

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.

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 - Pharma is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 1, placing it in top 6%.

Index Details

The fund is sponsored by State Street Global Advisors. It has amassed assets over $225.07 million, making it one of the average sized ETFs attempting to match the performance of the Healthcare - Pharma segment of the equity market. XPH seeks to match the performance of the S&P Pharmaceuticals Select Industry Index before fees and expenses.

The S&P Pharmaceuticals Select Industry Index represents the pharmaceuticals sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Pharmaceuticals Index is a modified equal weight index.

Costs

Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.

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

It has a 12-month trailing dividend yield of 0.70%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, 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, Eli Lilly And Company (LLY) accounts for about 6.37% of total assets, followed by Johnson & Johnson (JNJ) and Catalent Inc (CTLT).

The top 10 holdings account for about 49.24% of total assets under management.

Performance and Risk

Year-to-date, the SPDR SP Pharmaceuticals ETF has lost about -10.09% so far, and is up about 0.92% over the last 12 months (as of 05/14/2020). XPH has traded between $31.56 and $47.91 in this past 52-week period.

The ETF has a beta of 1.29 and standard deviation of 24.51% for the trailing three-year period, making it a high risk choice in the space. With about 42 holdings, it has more concentrated exposure than peers.

Alternatives

SPDR SP Pharmaceuticals 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, XPH 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.

Invesco Dynamic Pharmaceuticals ETF (PJP) tracks Dynamic Pharmaceutical Intellidex Index and the iShares US Pharmaceuticals ETF (IHE) tracks Dow Jones U.S. Select Pharmaceuticals Index. Invesco Dynamic Pharmaceuticals ETF has $357.79 million in assets, iShares US Pharmaceuticals ETF has $364.31 million. PJP has an expense ratio of 0.56% and IHE charges 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 Pharmaceuticals ETF (XPH): ETF Research Reports
 
Johnson Johnson (JNJ) : Free Stock Analysis Report
 
Eli Lilly and Company (LLY) : Free Stock Analysis Report
 
Catalent, Inc. (CTLT) : Free Stock Analysis Report
 
Invesco Dynamic Pharmaceuticals ETF (PJP): ETF Research Reports
 
iShares U.S. Pharmaceuticals ETF (IHE): ETF Research Reports
 
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