Investors Flock to This Vanguard Sector ETF
This article was originally published on ETFTrends.com.
The healthcare sector is one of this year's best-performing sectors and the group's recent strength is luring some investors to the related exchange traded funds. That includes the Vanguard Health Care ETF (VHT) , one of the largest healthcare ETFs.
For healthcare ETFs, the good news is that the U.S. economy moving into the late-cycle phase, overall growth may slow and signs of an economic slowdown could pop up. Consequently, investors may also turn to defensive sectors that are less economically sensitive, such as health care.
“The $8.2 billion Vanguard Health Care ETF, known by its ticker VHT, had 1.6 million shares worth $272 million trade Monday, record one-day turnover for the fund. It also hasn’t seen a day of outflows in August, with $145 million of net inflows putting the ETF on track for its best month since June 2017,” reports Bloomberg.
Up nearly 5% this month, VHT currently resides near record highs and is higher by almost 13% year-to-date.
Inside VHT
VHT is home to 377 stocks with a median market value of $67.4 billion. The fund devotes almost half of its combined weight to pharmaceuticals and biotechnology stocks.
“U.S. drugmakers are hot, with Pfizer Inc., Eli Lilly & Co. and Merck & Co. soaring to 16-year highs after reporting stronger than expected second-quarter results and the S&P 500 Index pharmaceuticals industry group hitting an all-time high Monday. Together, Pfizer and Merck make up more than 10 percent of the fund’s exposure. Its largest holding is industry bellwether Johnson & Johnson, which is heading for its best four-day run since early 2016,” according to Bloomberg.
VHT also devotes about a third of its combined weight to medical equipment makers, one of the hottest corners of the healthcare sector; and managed care providers.
Industry observers argue that medical technology companies can tap into increased healthcare spending among emerging economies while the U.S. market has matured and could experience slower growth. Looking ahead, in the years through 2024, spending growth is projected to average 5.8% and peak at 6.3% in 2020.
VHT charges 0.10% per year, or $10 on a $10,000 investment, making it cheaper than 92% of rival funds, according to Vanguard.
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