Should You Invest in the SPDR S&P Pharmaceuticals ETF (XPH)? – Green Entrepreneur

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Designed to provide broad exposure to the Healthcare – Pharma segment of the equity market, the SPDR S&P Pharmaceuticals ETF (XPH) is a passively managed exchange traded fund launched on 06/19/2006.

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Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Healthcare – Pharma is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 12, placing it in bottom 25%.

Index Details

The fund is sponsored by State Street Global Advisors. It has amassed assets over $207.93 million, making it one of the average sized ETFs attempting to match the performance of the Healthcare – Pharma segment of the equity market. XPH seeks to match the performance of the S&P Pharmaceuticals Select Industry Index before fees and expenses.

The S&P Pharmaceuticals Select Industry Index represents the pharmaceuticals sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Pharmaceuticals Index is a modified equal weight index.

Costs

Investors should also pay attention to an ETF’s expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 0.68%.

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.

This ETF has heaviest allocation in the Healthcare sector–about 100% of the portfolio.

Looking at individual holdings, Merck & Co. Inc. (MRK) accounts for about 5.24% of total assets, followed by Organon & Co. (OGN) and Perrigo Co. Plc (PRGO).

The top 10 holdings account for about 45.84% of total assets under management.

Performance and Risk

Year-to-date, the SPDR S&P Pharmaceuticals ETF has lost about -13.94% so far, and is down about -9.10% over the last 12 months (as of 12/07/2021). XPH has traded between $44.24 and $56.01 in this past 52-week period.

The ETF has a beta of 1.01 and standard deviation of 25.19% for the trailing three-year period, making it a high risk choice in the space. With about 49 holdings, it has more concentrated exposure than peers.

Alternatives

SPDR S&P Pharmaceuticals ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, XPH is a good option for those seeking exposure to the Health Care ETFs area of the market. Investors might also want to consider some other ETF options in the space.

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 $371.32 million in assets, Invesco Dynamic Pharmaceuticals ETF has $419.76 million. IHE has an expense ratio of 0.42% and PJP charges 0.58%.

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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SPDR S&P Pharmaceuticals ETF (XPH): ETF Research Reports

 

Merck & Co., Inc. (MRK): Free Stock Analysis Report

 

Perrigo Company plc (PRGO): Free Stock Analysis Report

 

Invesco Dynamic Pharmaceuticals ETF (PJP): ETF Research Reports

 

iShares U.S. Pharmaceuticals ETF (IHE): ETF Research Reports

 

Organon & Co. (OGN): Free Stock Analysis Report

 

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