This article was originally published on ETFTrends.com.
A small-cap ETF that tracks the healthcare segment has been among the best performers this year.
The Invesco S&P SmallCap Health Care Portfolio (PSCH) increased 30.2% year-to-date. In contrast, the S&P 500 gained 5.2% and the Russell 2000 Index increased 10.1% so far this year.
The Invesco S&P SmallCap Health Care ETF has helped capture the demand for one of the fastest-growth segments of the market. PSCH focuses on biotechnology, pharmaceutical, medical device and healthcare facilities on the smaller end of the size spectrum.
Specifically, the fund tries to reflect the performance of the S&P SmallCap 600 Capped Health Care Index. The portfolio includes 31.1% health care equipment & supplies, 29.8% health care providers & services, 20.2% biotech, 10.2%, pharma, 6.1% health care tech and 2.6% life sciences tool & services. Top holdings include Chemed 4.8%, Haemonetics 4.6% and HealthEquity 3.8%.
Smaller Companies Develop Innovative Solutions
While the big players tend to stand in the limelight, smaller companies have been developing innovative solutions and producing incremental advances that may offer potential growth opportunities, especially with steady merger and acquisition activity.
More companies may continue to capitalize on the ongoing low interest rate environment and engage in greater merger and acquisitions, or at least try to squeeze out some deals before the Federal Reserve decides to hike rates again. Financing remains cheap and companies are still sitting on huge cash stores, which may be put to use in expanding their portfolios.
The small-cap category has also been outperforming on encouraging domestic economic fundamentals as the U.S. experiences strong employment numbers, rising consumer spending and strong consumer confidence. The smaller companies are better positioned to capitalize on the domestic growth.
Furthermore, small-caps are insulated from international headwinds, especially in an environment gripped by fears of potential trade wars, tariff concerns, rising geopolitical risks and a strengthening U.S. dollar.
For more information on the small-cap segment, visit our small-cap category.
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