Healthcare ETFs are appealing in 2024 because they blend defensive qualities with significant long-term growth potential. They offer diversified exposure to the expanding healthcare sector, including pharmaceuticals, biotechnology, and medical devices, while being a cost-effective investment option. These ETFs capitalize on industry innovation and growth, making them a strong choice for investors.
Hence, investors might consider buying strong healthcare ETFs, such as iShares U.S. Healthcare ETF (IYH), Vanguard Health Care Index Fund ETF Shares (VHT), and The Health Care Select Sector SPDR Fund (XLV).
The global healthcare sector is undergoing rapid transformation, fueled by AI, sustainability initiatives, and remote technologies. These advancements aim to boost efficiency, cut costs, and improve patient care. With rising demand, healthcare ETFs present significant growth potential. The global healthcare market is expected to grow at a 22.3% CAGR, reaching $9.01 billion by 2028.
Healthcare ETFs are a solid investment choice in today's uncertain economy due to their diversified exposure. They span various resilient and innovative subsectors within healthcare, which can withstand economic fluctuations. This diversification not only mitigates risk but also provides stability and growth potential as the healthcare industry continues to advance.
Given this favorable backdrop, let’s evaluate the three Health & Biotech ETFs picks, starting with number three.
ETF #3: iShares U.S. Healthcare ETF (IYH)
IYH is an exchange-traded fund launched by BlackRock, Inc. The fund is managed by BlackRock Fund Advisors and invests in the public equity markets of the United States. It focuses on stocks of companies operating across the healthcare sector and includes growth and value stocks of companies with diversified market capitalizations.
The fund seeks to track the performance of the Russell 1000 Health Care RIC 22.5/45 Capped Index using a representative sampling technique.
With $3.54 billion in assets under management (AUM), IYH’s top holding is Eli Lilly and Company (LLY) with a 13.39% weighting, followed by UnitedHealth Group Incorporated (UNH), with a 9.11% weighting, and Johnson & Johnson (JNJ), with 6.63%. It has a total of 108 holdings.
It has an expense ratio of 0.40%, lower than the category average of 0.52%. It currently has a NAV of $66.39. IYH’s fund inflows came in at $15.61 million over the past month.
The fund’s annual dividend of $0.70 yields 1.06% on the current share price. Its four-year average yield is 1.11%. Moreover, its dividend payouts have increased at a CAGR of 7.5% over the past three years.
IYH has gained 16.8% over the past year and 21% over the past nine months to close the last trading session at $66.38.
IYH’s POWR Ratings reflect this promising outlook. The ETF’s overall A rating equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
IYH has an A grade for Buy & Hold, Peer, and Trade. Of the 42 ETFs in the B-rated Health & Biotech ETFs group, it is ranked #7. Click here to access all of IYH’s POWR Ratings.
ETF #2: Vanguard Health Care Index Fund ETF Shares (VHT)
VHT is an ETF launched and managed by The Vanguard Group, Inc. The fund invests in the public equity markets of the United States, focusing on stocks of companies operating across the healthcare sector. It includes growth and value stocks of companies with diversified market capitalizations. The fund seeks to track the performance of the MSCI US Investable Market Index (IMI)/Health Care 25/50 using a full replication technique.
With $18.86 billion in AUM, the fund has a total of 418 holdings. VHT’s top holding is LLY with a 10.31% weighting, followed by UNH with an 8.43% weighting, and AbbVie, Inc. (ABBV) with 5.20%.
VHT has an expense ratio of 0.10%, lower than the category average of 0.52%. It currently has a NAV of $288.15. Moreover, its five-day fund inflows came in at $23 thousand.
The fund’s annual dividend of $3.56 yields 1.23% on the current share price. Its four-year average yield is 1.29%. Moreover, its dividend payouts have increased at a CAGR of 7.7% over the past three years.
VHT has gained 20.8% over the past nine months and 16.6% over the past year to close the last trading session at $288.10.
VHT’s strong fundamentals are reflected in its POWR Ratings. The ETF has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
It has an A grade for Buy & Hold and Trade and a B for Peer. It is ranked #2 in the same group. To access all the POWR Ratings for VHT, click here.
ETF #1: The Health Care Select Sector SPDR Fund (XLV)
XLV is an ETF launched by State Street Global Advisors, Inc. and managed by SSGA Funds Management, Inc. The fund invests in the public equity markets of the United States, focusing on stocks of companies operating across the healthcare sector.
It includes growth and value stocks of companies with diversified market capitalizations. The fund seeks to track the performance of the Health Care Select Sector Index using a full replication technique.
With $42.02 million in assets under management (AUM), XLV’s top holding is LLY with a 13.21% weighting, followed by UNH with a 9.45% weighting, and JNJ with 6.88%. XLV has a total of 64 holdings.
XLV has an expense ratio of 0.09%, lower than the category average of 0.52%. It currently has a NAV of $157.23. Its fund inflows came in at $120.53 million over the past three months.
The ETF pays an annual dividend of $2.23, which yields 1.42% on the current price. It has a four-year average dividend yield of 1.55%. Its dividend payouts have increased at a CAGR of 8.2% over the past three years and 8.5% over the past five years.
XLV has gained 16.6% over the past year and 19.7% over the past nine months to close the last trading session at $157.20.
XLV’s POWR Ratings reflect its promising prospects. The ETF’s overall A rating equates to a Strong Buy in our proprietary rating system.
XLV has an A grade for Buy & Hold, Peer, and Trade. In the Health & Biotech ETFs group, it is ranked first. Click here to access all of XLV’s POWR Ratings.
What To Do Next?
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XLV shares were trading at $157.20 per share on Monday afternoon, up $1.08 (+0.69%). Year-to-date, XLV has gained 16.14%, versus a 19.34% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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