Exchange Traded Funds (ETFs)

A Healthy Dose of Healthcare: ETFs for 2016

This week begins our series on growth funds that I recommend for investors in 2016. And to that end, I’d like to go back and consider an exchange-traded fund (ETF) that this column discussed not too long ago that focused on a sector that I think has potential to generate strong returns this year.

If you guessed I’m referring to Health Care Select Sector SPDR (XLV), give yourself a pat on the back.

View the current price, volume, performance and top 10 holdings of XLV at ETFU.com.

The index on which this fund bases its holdings includes all S&P 500 stocks classified as health care. This means that it is basically composed of large, blue-chip, relatively stable health care companies. Familiar names fill the list of its top holdings.

Health care has a lot of tailwinds in its favor this year. If the market stops its nosedive, then health care is one of the sectors most likely to recover strongly.

This fund is down 5.33% over the last 12 months, though that situation improves if you take into account the just over $1 it paid in dividends during that time. XLV now is trading well off its 52-week high, and could provide impressive returns if it moved back up to its lofty levels of the not-too-distant past.

Indeed, XLV is a big fund, with assets managed totaling about $13 billion. Its dividend yield is 1.43%. The following chart offers a more complete picture of recent performance.

As a sector fund, this ETF invests all its assets in health care companies. Therein, prominent subsectors include pharmaceuticals, biotech and health care providers and suppliers. Among its largest holdings are Johnson & Johnson (JNJ), 10.44%; Pfizer Inc. (PFE), 7.46%; Merck & Co. (MRK), 5.57%; Gilead Sciences (GILD), 5.14%; and Allergan plc (AGN), 4.80%.

If you believe in the power of blue-chip health care stocks, Health Care Select Sector SPDR (XLV) is a useful tool for investing in a swath of them.

Remember to look for the current price, volume, performance and top 10 holdings of XLV at ETFU.com.

If you want my advice about buying and selling specific ETFs, including appropriate exit points, please consider subscribing to my Successful ETF Investing newsletter.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.

Doug Fabian

Doug Fabian is the Editor of Weekly ETF Report, a free weekly e-newsletter, and the newsletter Successful ETF Investing. He’s also the host of the syndicated radio show, “Doug Fabian’s Wealth Strategies.” Doug also edits the fast-paced trading service ETF Trader’s Edge, for investors who want to take their profits to the next level. Taking over the reins from his dad, Dick Fabian, back in 1992, Doug has continued to uphold the reputation of the newsletter as the #1 risk-adjusted market timer as ranked by Hulbert’s Investment Digest. Doug became a member of the “SmartMoney 30” in 1999 — a listing of the most influential individuals in the mutual fund industry. In the feature, SmartMoney magazine exclaims that Doug is the best-known “trend follower” among the $56 billion (and growing) group of financial advisors. In 2001, Doug wrote “Maverick Investing,” published by McGraw-Hill. He also regularly appears at seminars around the country, stands out on the pages of the largest newspapers (The Wall Street Journal, The Los Angeles Times, and The New York Times), and speaks on national television (CNBC, Fox News, and Bloomberg Forum). For more than 35 years, Successful ETF Investing (formerly the Telephone Switch Newsletter and Successful Investing) has produced double-digit percentage annual gains. Doug has become known for his expert knowledge and timely use of innovative tools, such as exchange-traded funds, bear funds, and enhanced-index funds to profit in any market climate. For more information about Doug’s services, go to http://www.fabian.com/