Invest in U.S. Pharmaceuticals with This Fund

(Note: Second in a series on pharmaceutical ETFs)

The SPDR S&P Pharmaceuticals ETF (NYSEARCA: XPH) tracks an equal-weighted index of U.S. pharmaceutical companies.

The exchange-traded fund (ETF) seeks to provide exposure to the pharmaceuticals segment of the S&P TMI. The ETF offers modified equal-weighted exposure to roughly 30 U.S. pharmaceutical companies, including large-, mid- and small-cap stocks.

The fund’s weighting scheme causes it to be far less concentrated than the industry itself, which is dominated by a handful of mega-cap names such as Johnson & Johnson (NYSE: JNJ), Pfizer Inc. (NYSE: PFE) and Merck (NYSE: MRK). Its heavy tilt towards mid- and small caps makes for a rather volatile fund relative to other equities in the same industry.

XPH sees significant daily trading volume with small spreads, allowing liquidity for investors who make block trades. The fund lets investors take strategic or tactical positions at a more targeted level than traditional sector-based investing.

The fund’s top holdings include Horizon Therapeutics Public Limited Company (NASDAQ: HZNP), 6.80%; Catalent Inc. (NASDAQ: HZNP), 5.22%; Jazz Pharmaceuticals Plc (NASDAQ: Jazz) 4.96%; Zoetis, Inc. Class A (NYSE: ZTS), 4.88%; and Pfizer Inc. (NYSE: PFE) 4.69%. Plus, the fund is heavily weighted in Pharmaceuticals (55.02%), Bio Therapeutic Drugs (21.5%) and Veterinary Drugs (9%).

Chart Courtesy of StockCharts.com

The fund has $247.05 million in assets under management and currently trades around $45 per share. XPH seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P Pharmaceuticals Select Industry Index. The fund is very efficient, offering a low fee and tight tracking that lags by less than XPH’s expense ratio. Overall, XPH is a solid way to capture a less-concentrated version of the pharmaceuticals market.

As always, I urge any interested investor to exercise due diligence in deciding whether or not this fund is suitable for individual portfolio goals.

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

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Intelligence Report, Investing Edge, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.