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Healthcare And Biotech ETFs Continue Recovery As Money Pours In

Wednesday, January 11, 2017 10:25
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Conventional wisdom had Hillary Clinton as “bad” for the Healthcare space, specifically the Biotechs, given her bold statements on the campaign trail in regards to reining in prescription drug costs across the segment if she were to take office.

She was not elected of course, but what surprised many, including us, was the fact that in spite of an initial surge in the Healthcare sector after the Trump election, the sector quickly sunk back near its pre-election lows before seeing a renewed surge in the past seven sessions or so. In fact, the largest “Healthcare” ETF is XLV (SPDR Health Care Select Sector, Expense Ratio 0.15%, $13.4 billion in AUM), and the fund has rallied in seven consecutive trading sessions now including today’s, holding above its 200 day MA after having trouble with that level since last October.


Trading volume in the product has been lackluster recently, although we have seen some options interest involving the January 72 calls which are slightly out-of-the-money now with XLV’s recent run higher.

Top holdings in XLV are familiar names, specifically, 1) JNJ (11.59%), 2) PFE (7.42%), 3) MRK (6.44%), 4) UNH (5.79%), and 5) AMGN (4.10%). Elsewhere, the much vilified “Biotech” segment has been staging a n even more impressive rally than the broader “Healthcare” space, which not only includes some Biotechs but “Big Pharma” and even Health Insurers (such as UNH) up more than 6% in the trailing one month as compared to about 4% in XLV.

IBB (iShares NASDAQ Biotechnology, Expense Ratio 0.48%, $8.3 billion in AUM) is up more than 16% from its early (pre-Presidential election) lows, but it is actually net down in the trailing one year period, so it may very well have additional room to the upside in the right business environment for the sector.

In the trailing one year period, XLV has attracted net assets (>$860 million in) and IBB has packed in even more (>$1.4 billion in), so in spite of abnormal price volatility in the greater Healthcare segment for at least the past year, investment interest has not dampened. Given the presence of upside call players in XLV we are also watching the levered bull CURE (Direxion Daily Healthcare Bull 3X, Expense Ratio 0.95%), as well as funds like LABU (Direxion Daily S&P Biotech Bull 3X, Expense Ratio 0.95%) and BIB (ProShares Ultra Nasdaq Biotechnology, Expense Ratio 0.95%).

The Health Care SPDR (ETF) (NYSE:XLV) was trading at $70.38 per share on Wednesday morning, down $1.12 (-1.57%). Year-to-date, XLV has gained 2.09%, versus a 1.06% rise in the benchmark S&P 500 index during the same period.

XLV currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 36 ETFs in the Health & Biotech ETFs category.

Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch

paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.

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