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

Sweta Killa
ETFs are more tax efficient than mutual funds due to the way they are structured. However not all ETFs are tax smart

If you're interested in broad exposure to the Healthcare - Pharma segment of the equity market, look no further than the VanEck Vectors Pharmaceutical ETF (PPH), 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 also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Healthcare - Pharma 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 Van Eck. It has amassed assets over $207.88 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

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 0.36%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.79%.

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.

Looking at individual holdings, Glaxosmithkline Plc (GSK) accounts for about 5.57% of total assets, followed by Novo Nordisk A/s (NVO) and Eli Lilly & Co (LLY).

The top 10 holdings account for about 50.58% of total assets under management.

Performance and Risk

Year-to-date, the VanEck Vectors Pharmaceutical ETF has gained about 10.29% so far, and it's up approximately 3.00% over the last 12 months (as of 02/21/2019). PPH has traded between $52.66 and $64.52 in this past 52-week period.

The ETF has a beta of 1 and standard deviation of 15.01% 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 an excellent 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 $391.98 M in assets, Invesco Dynamic Pharmaceuticals ETF has $469.39 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 Vectors Pharmaceutical ETF (PPH): ETF Research Reports
 
Eli Lilly and Company (LLY) : Free Stock Analysis Report
 
Novo Nordisk A/S (NVO) : Free Stock Analysis Report
 
GlaxoSmithKline plc (GSK) : 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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