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UnitedHealth Pops on Solid Q4: Healthcare ETFs to Buy

Sweta Killa
Personal Income and Consumer Spending figures for March were mixed this Monday, with income cooler than expected but spending slightly higher than estimates.

The largest U.S. health insurer UnitedHealth Group UNH reported robust fourth-quarter 2018 results. The company breezed past the Zacks Consensus Estimate both on earnings and revenues (see: all the Healthcare ETFs here).

Earnings per share came in at $3.28, well above the Zacks Consensus Estimate of $3.20 and 27% higher than the year-ago quarter. Revenues rose 12.2% year over year to $58.42 billion, breezing past the estimated $57.76 billion. Robust results were credited to growth in its Optum services business, including its pharmacy benefits unit. Notably, Optum revenues topped $100 billion for the first time in the history last year.

The company reaffirmed its adjusted earnings per share guidance of $14.40-$14.70 for this year (read: Best Sector of 2018 and its Hit ETFs & Stocks).

Based on solid results, UNH shares rose 3.5% at the close. The stock currently has a Zacks Rank #2 (Buy) and belongs to a top-ranked Zacks industry (top 18%). Further, it flaunts a top VGM Score of A, underscoring its potential to outperform in the weeks ahead.

Given this, ETFs having the largest allocation to this health insurer giant has been in focus. We have highlighted them in detail below:

iShares Evolved U.S. Healthcare Staples ETF IEHS

This actively managed ETF employs data science techniques to identify companies with exposure to the health care staples sector. It holds 156 stocks in its basket with UnitedHealth taking the top spot at 13.7%. The fund has accumulated $4 million in its asset base and sees meager volume of 4,000 shares. It charges 18 bps in annual fees (read: 8 Top Active ETFs of 2018).

iShares U.S. Healthcare Providers ETF IHF

This ETF follows the Dow Jones U.S. Select Healthcare Providers Index with exposure to companies that provide health insurance, diagnostics and specialized treatment. In total, the fund holds 45 securities in its basket and UNH occupies the top position with 13.3% share. The fund has amassed $845.7 million in its asset base, while volume is good at about 115,000 shares per day on average. It charges 43 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.

Health Care Select Sector SPDR Fund XLV

The most popular health care ETF, XLV follows the Health Care Select Sector Index. This fund manages nearly $18.5 billion in its asset base and trades in heavy volume of around 10.6 million shares. Expense ratio comes in at 0.13%. In total, the fund holds 61 securities in its basket with UNH taking the third spot at 7.3% of the assets. Pharma accounts for 33% share from a sector look while health care equipment and supplies, health care providers and services, and biotech make up for a double-digit exposure each. It has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: Top-Ranked Sector ETFs & Stocks to Buy for 2019).

iShares U.S. Healthcare ETF IYH

This fund offers exposure to 128 securities by tracking the Dow Jones U.S. Health Care Index. Here again, UnitedHealth is the third firm accounting for 6.7% of total assets. In terms of industrial exposure, pharma takes the top spot at 31.2%, followed by health care equipment (20.8%) and biotech (20.1%). The product has amassed $2.3 billion in its asset base while charges 43 bps in annual fees. It trades in a moderate volume of around 121,000 shares a day and has a Zacks ETF Rank #2 with a Medium risk outlook (read: 10 Top-Ranked ETFs That Crushed the Market in 2018).

Vanguard Health Care ETF VHT

This ETF tracks the MSCI US Investable Market Health Care 25/50 Index and holds 359 stocks in its basket. Of these, UNH takes the third spot with 6.3% allocation. Pharma takes the largest share at 30.7%, while health care equipment and biotech round off the top three spots. VHT is also one of the popular and liquid ETFs with AUM of $8.5 billion and average daily volume of about 294,000 shares. It charges 10 bps in annual fees and has a Zacks ETF Rank #1 with a Medium risk outlook.

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iShares U.S. Healthcare ETF (IYH): ETF Research Reports
 
Vanguard Health Care ETF (VHT): ETF Research Reports
 
iShares U.S. Healthcare Providers ETF (IHF): ETF Research Reports
 
Health Care Select Sector SPDR Fund (XLV): ETF Research Reports
 
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