While some American’s were elated with Obama’s re-election, Wall Street made it quite clear who it had voted for as markets took a sharp nosedive in a post-election sell off immediately following the President’s victory. To many investors, Obama’s re-election has placed looming concerns over the Fiscal Cliff to the forefront, as the automatic round of massive spending cuts and tax hikes now seem inevitable come January 1. And with Democrats maintaining control of the Senate and Republicans dominating the House, many remain understandably concerned about the split Congress coming up with a viable resolution [see 101 ETF Lessons Every Financial Advisor Should Learn].
For investors, however, Obama’s re-election will undoubtedly have an impact on everyone’s bottom line, with taxes being the main concern. But, of course, on Wall Street, there is always a winning play. Obama’s victory has already benefited one corner of the market – healthcare, a sector that has a promising future as the President’s win locks in another four years of Obamacare. Currently, there are 30 ETFs available to investors that offer targeted exposure to this potentially lucrative corner of the market. Below, we highlight the already stellar performances of various niche segments of the healthcare ETF space.
|BBH||Market Vectors Biotech ETF||39.56%||42.92%||76.29%||90.34%|
|FBT||NYSE Arca Biotechnology Index Fund||30.56%||29.25%||57.93%||68.32%|
|XBI||SPDR S&P Biotech ETF||25.50%||32.21%||67.26%||39.47%|
|PBE||Dynamic Biotech & Genome||11.37%||13.98%||37.68%||13.98%|
|*Returns as of 11/7/2012|
Biotechnology ETFs have certainly held their ground over the last few years, as many companies within the industry continue to be pioneers in the healthcare field. Big names like Amgen Inc. (AMGN), Gliead Sciences Inc (GILD) and one of Forbe’s top picks for most innovative companies, Alexion Pharmaceuticals (ALXN), have all enjoyed handsome returns, with many logging in double-digit gains just one day after the election.
Without a doubt, there has been a steady uptrend for these biotech ETFs, as illustrated by the funds’ stellar returns. For those looking to make a leveraged play on the sector, ProShares Ultra Nasdaq Biotechnology ETF (BIB) is currently the only option, but be aware that this powerful tool comes with a steep price tag, clocking in at 0.95%. Year-to-date, BIB is up a whopping 46.72% [see also Baby Boomers ETFdb Portfolio].
Supply Side Winners: Medical Devices
One of the main objectives the President wishes to achieve with Obamacare is the expansion of free preventative services and increased access and affordability. With this consequently comes an increased demand for medical equipment and devices as more people enter the healthcare consumer pool. Currently, there are only two ETFs that offer targeted exposure to this niche segment of the healthcare world: iShare’s Dow Jones US Medical Devices Index Fund (IHI) and State Street’s SPDR S&P Health Care Equiptment ETF (XHE).
Considering these two funds’ targeted focus, it is not surprising to see some major overlaps in holdings, with industry leaders like Intuitive Surgical (ISRG) and Varian Medical Systems, Inc (VAR) both making appearances in IHI’s and XHE’s top ten holdings. Year-to-date, XHE has gained 13.56%, while IHI has trailed behind by only a slim margin. For the cost-conscious investors, XHE may be a more appealing option, as it charges 13 basis points lower than IHI [see also Vote For Obama Or Romney With These ETFs].
Pharmaceuticals Power On
|IHE||Dow Jones U.S. Pharmaceutical Index Fund||13.14%||21.51%||67.19%||68.91%|
|PPH||Market Vectors Pharmaceutical ETF||10.55%||15.67%||28.24%||0.06%|
|XPH||SPDR S&P Pharmaceuticals ETF||9.25%||15.17%||62.16%||73.30%|
|DRGS||Global Big Pharma ETN||9.23%||15.68%||n/a||n/a|
|*Returns as of 11/7/2012|
Following similar logic, pharmaceutical companies are also poised to profit from Obamacare with more individuals seeking preventative care and pharmaceutical treatments. Already, pharma ETFs have rewarded investors with handsome returns over the years, despite their somewhat volatile nature [see also 3 Simple All-ETF "Core" Portfolios].
The portfolios of many of these ETFs include some of the biggest names in the industry, including Pfizer, Johnson & Johnson, Merk & Co and Abbott Laboratories. For those looking for a global spin on the pharma market, RBS’s DRGS is a compelling option, as it offers exposure to pharmaceutical companies from the United States, United Kingdom, Switzerland, Denmark, France, Israel and Canada.
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Disclosure: No positions at time of writing.
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- New Pharma ETN (DRGS) Hits The Market
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