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Should You Invest in the VanEck Vectors Pharmaceutical ETF (PPH)?

Sweta Killa
Progressive's (PGR) February results reflect solid policies in force, higher premium as well as surge in investment income.

Designed to provide broad exposure to the Healthcare - Pharma segment of the equity market, the VanEck Vectors Pharmaceutical ETF (PPH) is a passively managed exchange traded fund launched on 12/20/2011.

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

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 Van Eck. It has amassed assets over $229.12 M, making it one of the average sized ETFs attempting to match the performance of the Healthcare - Pharma segment of the equity market. PPH seeks to match the performance of the MVIS US Listed Pharmaceutical 25 Index before fees and expenses.

The MVIS US Listed Pharmaceutical 25 Index tracks the overall performance of companies involved in pharmaceuticals, including pharmaceutical research and development as well a production, marketing and sales of pharmaceuticals.

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 1.93%.

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.

Looking at individual holdings, Merck & Co Inc (MRK) accounts for about 6.15% of total assets, followed by Astrazeneca Plc (AZN) and Pfizer Inc (PFE).

The top 10 holdings account for about 56.65% of total assets under management.

Performance and Risk

So far this year, PPH has gained about 2.25%, and is down about -6.27% in the last one year (as of 01/07/2019). During this past 52-week period, the fund has traded between $52.66 and $64.61.

The ETF has a beta of 0.96 and standard deviation of 15.16% for the trailing three-year period, making it a medium risk choice in the space. With about 26 holdings, it has more concentrated exposure than peers.

Alternatives

VanEck Vectors Pharmaceutical ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, PPH is a great option for investors seeking exposure to the Health Care ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

IShares U.S. Pharmaceuticals ETF (IHE) tracks Dow Jones U.S. Select Pharmaceuticals Index and the Invesco Dynamic Pharmaceuticals ETF (PJP) tracks Dynamic Pharmaceutical Intellidex Index. IShares U.S. Pharmaceuticals ETF has $370.19 M in assets, Invesco Dynamic Pharmaceuticals ETF has $476.43 M. IHE has an expense ratio of 0.43% and PJP charges 0.57%.

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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VANECK-PHARMA (PPH): ETF Research Reports
 
Merck & Co., Inc. (MRK) : Free Stock Analysis Report
 
Pfizer Inc. (PFE) : Free Stock Analysis Report
 
AstraZeneca PLC (AZN) : Free Stock Analysis Report
 
PWRSH-DYN PHARM (PJP): ETF Research Reports
 
ISHARS-US PHARM (IHE): ETF Research Reports
 
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