A View of ETFs In An Obama White House

If Barack Obama were to win the election for presidency this November, what would happen to the investment world, particularly exchange traded fund (ETF) investors?

Awhile back, we talked about funds that could benefit in a McCain win, as well as an overall Democratic win.

Jonathon Bernstein for ETFZone believes that the most immediate and powerful impact of an Obama win would be the within the area of foreign policy. He could help to ease tensions with the Middle East and Venezuela, which would in turn calm oil prices and shift the overall momentum of the markets. Currently, oil is at all-time highs, so just the thought of Obama in the White House would send oil lower in funds such as Unites States Oil (USO).

The dollar might end up in a stronger state, as a major reason the dollar fell against the euro is oil imports. If the United States were to import less oil, or or pay less for the oil it does import, we might see an improved trade deficit, thus upping the demand for U.S. dollars. CurrencyShares Euro Trust (FXE) would reflect the dollar-euro ratio.

Obama says he would keep tax cuts for the middle class, and doesn't support Bush's tax cuts for the wealthy. Both those and his dividend tax cut expire in 2010. Dividend-focused ETFs such as iShares Dow Jones Select Dividend Index (DVY) or the State Street SPDR Dividend (SDY) could be vulnerable if the tax cuts aren't renewed.

Obama also supports working to put an end to global warming and a push to reduce U.S. carbon emissions by 80% by 2050. He also supports ending the ban on stem cell research.  Both iShares Nasdaq Biotechnology (IBB) and the WildersharesClean Energy (PBW) could experience positive movement if these issues are addressed.

Biotech Sector And ETFs Suffer Failed Study

The biotechnology sector suffered after a Genetech Inc. (DNA) study regarding treatment of Lupus failed, letting down related exchange traded funds (ETFs).

The study of Rituxan was in the later stages, reports Wanfeng Zhou for Thomson Financial.

Genentech lost 5.8% yesterday, while Biogen Idec Inc. (BIIB) lost 4.6%.

Both companies are major components of biotechnology-related ETFs:

• Biotech HOLDRs (BBH): The fund dropped 3.1% to its lowest level since Feb. 22. Genentech is 39.7% of the fund, while Biogen is 9.4%. Year-to-date, the fund is up 0.7%.
• iShares Nasdaq Biotechnology (IBB): Lost 1.1% in trading yesterday. Biogen is 4.3% of the fund. Year to-date, the fund is down 4.1%.

Be Part Of The Solution With A Biotech ETF

The best approach to being involved with the advent of a breakthrough medicine, or a cure for cancer, as an investor, would be to consider a biotech-focused exchange traded fund (ETF).

The most impressive method to access biotech thus far is through an ETF such as iShares Nanotech Biotech Index(IBB). This ETF gives an inexpensive route to biotech with diversification.

Marc Lichenfield for Seeking Alpha has two main points he wants to share concerning biotech in general:

• Biotech tends to drop in the summer, so there could be a good point-of-entry during the months ahead
• Biotech has an above-average risk, so do not devote too much of your portfolio to it. The sector can also reward generously, making the risk worth it.

While the sector has been quiet lately, if either Hillary Clinton or Barack Obama wins the presidential election, the biotechnology sector could stand to benefit, as they're both supporters of ending the ban on stem cell research.

Other Biotech ETFs worth your consideration:

• Biotech HOLDRs (BBH)
• SPDR S&P Biotech (XBI)
• PowerShares Dynamic Biotech S&P Genome (PBE)

A Rise In Prescription Costs May Take ETFs Up, Too

The problem of expensive health care may soon cut into people who are fully insured, as health insurance companies adopt a new pricing system, sending focused stocks and exchange traded funds (ETFs) into more turbulence. 

The new pricing system focuses prescriptions for expensive drugs used for either saving lives or slowing the progress of serious diseases. Patients may now have to shell out hundreds or thousands of dollars despite the fact that they have insurance.

Gina Kolata for The New York Times says that with the new pricing system, insurers have abandoned the traditional arrangement where patients pay a fixed amount such as $10 or $20, regardless of the drug's actual cost. Patients are responsible for a percentage of the cost of certain high-priced drugs, around 20-33%, in some cases equal to thousands of dollars a month.

The plan, known as "Tier 4," also affects drugs in which there is no generic equivalent, so patients have no alternatives. Insurers argue that this keeps the premiums lower for everyone. Unfortunately, this is an erosion of the very basis of insurance.

Pharmceutical HOLDRs (PPH) may feel a recovery from this new system. Health Care Select Sector SPDR (XLV) could also feel the nausea lift. Year-to-date, PPH is up 3.4%, while XLV is down 10%.

XShares also has its line of HealthShares, which invest in companies involved in various aspects of the healthcare industry. HealthShares Autoimmune-Inflammation (HHA) invests in companies involved in research, clinical development and/or the commercialization of therapeutic agents for the treatment of such diseases as multiple sclerosis and rheumatoid arthritis. Year-to-date, the fund is down 12.6%.

Health Care Revenues, ETFs At The Mercy Of Presidential Candidates

Health care exchange traded funds (ETFs) are non-discretionary, have a projected growth rate at 6.6%-6.7% from 2008 through 2017. It could also get a boost from specific reforms, if those reforms come to pass. Much of that depends on which president wins the election.

Senator John McCain:

• Wants a focus on health care for veterans and ensuring that funding is distributed to them fairly
• Giving military retirees tax breaks to help pay their premiums
• Opposes user fees on military retirees for using military medical facilities

Senator Hillary Clinton:

• Wants universal health-care coverage by the end of her second term
• Wants collaboration to achieve this goal

Senator Barack Obama:

• Wants universal coverage by 2012
• Wants to modernize the health care system and keep costs down
• Wants to promote preventative care

Meanwhile, the growing population of baby boomers will drive the growth of the need for health care, reports Will McClatchy for ETFZone. Spending is projected to climb from 16.3% of the GDP to 19.5% of the GDP by 2017. 

A Republican candidate may quietly tighten down on Medicare benefits to cut costs and increase profits, while a Democrat would push volume discounts. These and other health-care related ETFs could be affected no matter what happens next January:

• Health Care Select Sector SPDR (XLV)
• Pharmceutical HOLDRs (PPH)
• iShares NASDAQ Biotechnology (IBB)
• iShares Dow Jones US Health Care (IYH)
• Vanguard Health Care (VHT)

Health Care ETFs Looking A Little Wan

  How healthy are exchange traded funds (ETFs) focused on the medical world for your portfolio?

Many of the ETFs from this field have experienced the ups and downs of the broader market of late so far this year.

• iShares Dow Jones US Healthcare Provider Fund (IHF), down 24.8% year-to-date
• iShares Dow Jones US Pharmaceuticals Fund (IHE), down 11.3% year-to-date
• SPDR S&P Biotech (XBI), down 14.8% year-to-date

The iShares S&P Global Healthcare Index Fund (IXJ) does provide broader exposure to the health care of other countries such a England, Switzerland and France, but it's still bedridden at -10.7% year-to-date.

What's the prognosis, doc? Well, while it isn't terminal, analysts feel that it will be some time before we see a turnaround within the healthcare sector. Momentum may not be in your favor, but they do represent long-term bargain buys.

Billy Fisher for TheStreet reports that the biotechnology sector may be harder to foretell. While the sector gives ample room for growth because of the ability of companies to get new approval for existing drugs, investors must be patient. This sector moves to its own beat instead of that of the rest of the market, which gives it growth advantage over healthcare.

Defense, Biotechnology ETFs Stand to Gain if McCain Wins

The events of Super Tuesday didn't solidify much in the way of the presidential race on the Democratic side, but one person has taken a few guesses as to which exchange traded funds (ETFs) will win if Sen. John McCain takes the presidency.

Based on McCain's record and statements over the last few months, Kevin Baker for The Street predicts that certain sectors, in particular defense and biotechnology, could perform especially well under his leadership.

McCain has said that he's willing to keep troops in Iraq for 100 years if that's what it meant to achieve victory. He wants the United States to "bolster its regional military posture." PowerShares' Aerospace & Defense (PPA) could benefit if McCain stepped up military spending. Among its top holdings are Lockheed Martin (LMT, 6.3%) and Boeing (BA, 6.6%).

McCain also supports embryonic stem-cell research, which could lead to federal funding for it to be restored. If that happens, the SPDR S&P Biotechnology (XBI) could benefit from renewed focus on the "care and cure of chronic disease." Among the fund's top holdings are Regeneron Pharmaceuticals (REGN, 3.6%) and Genentech, Inc. (DNA, 3.5%).

In the interest of balance, Baker will talk later about which ETFs stand to gain in a Hillary Clinton and Barack Obama presidency.

Biotechnology ETFs Raise Hopes On Stock Jump

Biotechnology exchange traded funds (ETFs) and stocks are thriving as fourth quarter earnings from Biogen Idec Inc. (BIIB) gave investors an 84% jump in profit.

According to the Associated Press, Biogen's profits rose on news of sales of its multiple sclerosis drug Avonex and Rituxan, which treats non-Hodgkins lymphoma and rheumatoid arthrities. Rituxan is co-promoted by Genentech (DNA).

Biotech ETFs that could get a lift on the good news:

• iShares Nasdaq Biotechnology (IBB):  Biogen holds 4%; down 4.1% year-to-date
• Biotech HOLDRs (BBH): Biogen, 9.3%;Genentech, 36.6%; up 1% year-to-date
• SPDR S&P Biotech (XBI): Biogen, 3.5%; Genentech, 3.5%; down 6% year-to-date
• First Trust Amex BiotechnologyIndex ETF (FBT): Biogen, 3.8%; Genentech, 4.7%; down 6.6% year-to-date
• PowerShares Dynamic Biotech & Genome (PBE): Biogen 3.9%; Genentech 4.4%; down 7.9% year-to-date

ETF Bargain Hunters Start Searching

Bargain shoppers may have their time cut out for them, as many exchange traded funds (ETFs) are touting low price-to-earnings ratios (P/E Ratios).

The P/E Ratio is a valuation of a company's current share price compared to its per-share earnings. Generally, a high P/E indicates that investors are expecting higher earnings growth in the future.

The exact bottom of some of the most beat up sectors is unknown, but long-tern value seekers should be on the lookout, according to Gary Gordon for ETF Expert.

Gordon points out the Dow Jones US Insurance Index (IAK) which is near its 52-week low, and trading at a multiple of 8.7. It's been bearing the brunt of the subprime mess, however, don't forget how profitable insurance companies can be.

iShares Nasdaq Biotechnology Index (IBB) is trading at a P/E of 11, where biotech companies usually have a historic multiple of 20.

At the bottom of the bin is the S&P Homebuilder Index (XHB) at a P/E of 4.25. This is for the hardiest of investors who can see long-term opportunities amidst all the gray.

Use Caution With Biotechnology ETFs

Sometimes, not all sector exchange traded funds (ETFs) are alike. It pays to do your homework, because although there are often several funds covering an area, performance can vary greatly.

Alan Brochstein of Seeking Alpha says, for example, that when it comes to biotechnology funds, it might appear that you can't go wrong no matter what you pick, caution should still be exercised when it comes to ETFs. Not doing your research could cost you.

The Biotech HOLDR (BBH) is heavily concentrated in three companies and has 15 stocks. The SPDR S&P Biotech (XBI) is more diversified, with 31 holdings, and its top holdings represent less than 5% of the fund's value. Finally, there is the iShares Nasdaq Biotech Index Fund (IBB), which holds 170 stocks.

Aside from the wide-ranging number of holdings in these funds, the 2007 returns for each fund show big differences, too: IBB returned close to the market averages, BBH lost almost 12% and XBI gained 29%.

M&A Helping Biotech ETF

Biotech stocks and related exchange traded funds (ETFs) tend to take a downward slide once excessive risk enters into the market. Biotech ETFs, have held there own over the past few months, as iShares Nasdaq Biotechnology Index Fund (IBB) is up 3.2% for the past 6 months. Meanwhile the S&P 500 is down 2.3% for the same period.

Don Dion for Seeking Alpha reports that the typically volatile IBB got a boost from mergers and acquisitions. In fact, these newly formed companies could even take the place of the big pharmaceutical companies. Big pharma is struggling and many key drugs are losing patent protection in the coming years, so many firms are looking to fill their pipes through acquisitions. Large-cap biotechs have entered the picture and have helped push up deal premiums.

IBB holds 171 stocks, making it more diversified. There are 35 small or micro-cap stocks and it holds 26.7% of mid-caps stocks, giving it a good position if mergers continue. Established biotechs are becoming more like blue-chip pharma companies since they are taking over the marketing, distribution and sales of their products. Generics are not a threat to biotech like they can be for pharmaceutical firms.

Variations in Biotechnology ETFs

We've mentioned before that not all exchange traded funds (ETFs) that cover a specific region or sector are created equal. Even if the stocks are similar, ETFs can behave differently. In funds weighted by market capitalization, bigger companies tend to have more sway. In equal-weighted funds, all companies have the same impact. They'll do better when the smaller ones shine. One sector that illustrates that point clearly is in biotechnology ETFs. Although these ETFs' performance hasn't been too exciting recently, they're still worth watching. Let's examine five biotech ETFs:

• SPDR S&P Biotech (XBI)
  XBI is up 29.8% year-to-date. It's top three holdings are Myriad Genetics (MYGN) at 3.6%, Biomarin Pharmaceutical (BMRN) at 3.4% and Alkermes (ALKS) at 3.5%.
• PowerShares Dynamic Biotech & Genome (PBE)
  PBE is up 11.6% year-to-date. It's top three holdings are Imclone Systems (IMCL) at 5.7%, Amgen (AMGN) at 5.3% and Gilead Sciences (GILD) at 5.3%.
• First Trust AMEX Biotechnology Index (FBT)
  FBT is up 11.6% year-to-date. It's top three holdings are Vertex Pharmaceuticals (VRTX) at 6.7%, Biogen Idec (BIIB) at 5.9% and Amylin Pharmaceuticals (AMLN) at 5.7%.
• iShares Nasdaq Biotechnology (IBB)
  IBB is up 11.3% year-to-date. It's top three holdings are Amgen (AMGN) at 10.5%, Gilead Sciences (GILD) at 7.2% and Celgene (CELG) at 6.4%.
• Biotech HOLDRs (BBH)
  BBH is down 3.3% year-to-date. It's top three holdings are Genentech (DNA) at 38.7%, Amgen (AMGN) at 20.7% and Gilead Sciences (GILD) at 15.1%

What should jump out at readers is how different the many of the holdings and their weightings are in the different biotech ETFs. That's one factor behind some of the wide ranges of performance. Another factor is the bid-ask spread. As with stocks, there's a difference between what a market maker will charge an ETF buyer and what that same dealer will pay a seller. The difference is the "bid-ask spread," and for investors, the smaller the spread, the lower the cost, reports Ben Levisohn for BusinessWeek. As a general rule, when an ETF sees little trading activity, bid-ask spreads can get wide.

ETFs in the Biotech Environment

There has been mixed news on biotech stocks and exchange traded funds (ETFs) this year.  Large-cap biotech has been hurt by concerns on drug safety, tightened Medicare reimbursement and new competition from generics, reports Karen Anderson for Morningstar. Small-caps have fared well due to positive clinical data and takeover speculation. And as baby boomers age they'll need the benefits of biotech.  Investing in biotechnology can be confusing so a basket of biotech stocks such as an ETF can be helpful.  Some of the biotech ETFs include:

• iShares Nasdaq Biotechnology (IBB) - Celgene (CELG) makes up 6% of IBB and CELG recently got FDA approval on a cancer blood cells treatment.  IBB is up 4.9% year-to-date.
• SPDR S&P Biotech (XBI) - Fifty-two percent of this ETF is made up of small-cap biotech companies.  XBI is up 23% year-to-date
• First Trust Amex Biotechnology Index (FBT) - The 20 holdings in this ETF span across large- mid- and small-cap stocks.  FBT is up 6.8% for the year.
• Biotech HOLDRs (BBH) - This ETF has predominately large-cap stocks, with Genetech (DNA) and Amgen (AMGN) making up 60%.  BBH is down 5.1% so far this year.
• PowerShares Dynamic Biotech & Genome (PBE) - Small-caps make up about 45% of this ETF, which is up 7.3% this year.

Boomers Could Help Future of Health and Biotechnology ETFs

Investing in biotechnology and health-related exchange traded funds (ETFs) would seem to make sense as the baby boomer generation ages. An increase in older citizens creates more demand for health care services with the best technology and medications available. In fact, the number of available health care-related ETFs has doubled to 41 in 2007, according to Trang Ho for Investor's Business Daily.

However if you decide to add this sector to your portfolio, be careful which biotech and health-related ETFs you choose, as all are not created equal. For example, the iShares Nasdaq Biotechnology (IBB) that follows the Nasdaq Biotechnology Index has had a much more volatile performance than the general market. IBB is a general biotech ETF that invests at least 90% of its assets in biotech-related American Depository Receipts (ADRs). Currently, IBB is up 5.4% year-to-date.

If you look at the iShares Dow Jones U.S. Medical Devices (IHI) it's been soaring up, up and away compared to the market, as Gary Gordon for ETF Expert notices. IHI follows the Dow Jones U.S. Select Medical Equipment index. It invests in medical equipment companies that make prosthetics, pacemakers, X-ray machines among other devices. Currently, IHI is up 15.6% year-to-date.

Health Care and Biotech ETFs Remain Healthy through Market Volatility

Even with rough markets last week, there were some exchange traded funds (ETFs) that ended on a positive note. Some were the narrowly-focused health care ETFs, HealthShares Autoimmune-Inflammation (HHA) and HealthShares Metabolic-Endocrine (HHM), which were up 7.7% and 7.1% respectively, according to Kevin Baker for TheStreet.com.

SPDR S&P Biotech (XBI) was another ETF that ended the week well. It closed up 5.7%. As we mentioned before, the health care sector, which can include biotechs, is generally a safe place to be when the market is all over the place. People will always get sick and need medicine that biotechs work to create, so they tend not to follow market trends. So analysts recommend not to let market volatility drive you crazy, says Adam Feuerstein for TheStreet.com. Keep an eye on the trends, and have your exit strategy in place.

Biotech ETFs - What Happened?

Could it be time to invest in a biotech-focused exchange traded fund (ETF)? Some say this was supposed to be the biotech century, where innovation was to lead to efficient, sustainable energy and gene-based drugs were to replace chemical compounds. Smartcrops, resistant to disease and adverse weather, were to feed the world. So what happened? Jonathan Bernstein of ETFzone says advances in the industry have come slower than expected, meanwhile, biotech shares have languished and investor enthusiasm has turned to apathy. Could stem cell research and FDA reform give the sector a boost?

• iShares Nasdaq Biotechnology (IBB) - up 3.0% year-to-date
• SPDR S&P Biotech (XBI) - up 15.3% - There are 34 holdings in XBI, which are evenly weighted at about 3%. Three of the five top holdings are up considerable for the year: Biogen Idec (BIIB) 12%; Martek Biosciences (MATK) 20% and Digene Corp (DIGE) 28% 
• First Trust Amex Biotechnology Index (FBT) - up 4.8%
• Biotech HOLDRs (BBH) - down 7.8%; There are only 15 holdings in BBH and the two largest holdings are down for the year - Genetech (DNA) makes up 40% of the portfolio and is down 7% and Amgen (AMGN) makes up 21% of BBH and is down 19%.
• PowerShares Dynamic Biotech & Genome (PBE) - up 6.1%

Biotech ETFs Healthy on R&D

The biotech industry, and the exchange traded funds (ETFs) that track them have had a strong year. The SPDR S&P Biotech Fund (XBI) was up 11.2% last month, reports Joanne Von Alroth for Investor's Business Daily. Other Biotech ETFs include iShares Nasdaq Biotechnology (IBB), up 10% over the last month; Biotech HOLDRs (BBH) with a 6% gain; and PowerShares Dynamic Biotech and Genome (PBE), also up 10%.

Pharmaceutical companies rely largely on biotech for their R&D while they search out new drugs and treatments. With all the "blockbuster" drugs going off market lately, the scurry to find new ones has begun. U.S. R&D spending last year was $23 billion, with 82% of the amount spent by similar companies around the world.

HealthShares ETFs To Launch Tuesday

A unique family of exchange traded funds (ETFs) are expected to launch Tuesday, January 23rd on the New York Stock Exchange. The HealthShares focus is to allow individuals and investors to narrowly choose where to put their money within the healthcare industry. Baskets of stocks range from companies who solely focus on either curing, diagnosing, or treating specific disease such as heart disease, cancer or diabetes.

Each fund is made up of a combination of small-,mid-,or large-cap companies focused on a therapeutic 'Vertical' or sub-segment of the complex healthcare, life-science and biotechnology industries. This methodology is a precise instrument that leverages the potential of healthcare investing while lowering the risk of single stock picking. Some of the Healthcare's ETFs will include:

• HealthShares Cardio Devices
• HealthShares Emerging Cancer
• HealthShares Diagnostics
• HealthShares Enabling Technologies
• HealthShares Patient Care Services

Biotech ETF (IBB) Adds Diversity While Big Pharma Feels Congressional Pressure

Pharmaceutical companies are feeling pressure from Congress to lower the price of drugs for Americans. Even though this has had a slightly negative effect on bigger pharmaceutical companies, biotechnology stocks in general look strong. In fact, it's been the best performing sector in the past two weeks. iShares Nasdaq Biotechnology Index Fund(IBB) is a biotech ETF whose top holdings are: Amgen(AMGN) 14%; Gilead Sciences (GILD) 6%; Celgene Corp(CELG)5%.

James B. Stewart of SmartMoney.com wrote that Pfizers recent pullout for clinical trials of Torcetrapid sparked his interest of the plight of pharmaceutical drugs. Afterall, drug companies paradoxically are so vital and sought after by so many, yet can be villanized and blamed for all that goes bad. The Congressional hearings for Merck's Vioxx, another paradox, when Merck had voluntarelly pulled the drug, yet the public pleaded for it despite the ill-effects some had experienced. These are reasons it is a better call to diversify and invest in an ETF rather than one company. This way your investment doesn't go down all at once with ill fate.

UPDATE: For full disclosure, Tom Lydon purchased IBB for managed clients on 1/18/07.

Biotechnology ETFs Just Getting Started

Biotech focused exchange traded funds (ETFs) could soon be effected by the upcoming success of Monsanto (MON), a crop biotech company.  Carey Gillam of Reuters reports the company's research and development is accelerating at a record pace and 2007 will be the biggest year yet for screening and testing genes.

Other biotech companies have been performing well and have helped push up the biotech ETFs.  Amgen (AMGN) and Genentech (DNA) are top holders in the two ETFs listed below.  These companies have encouraging products in the pipeline and product sales have been on the rise.

• Biotech HOLDRs (BBH) is up 3% this week
• iShares Nasdaq Biotechnology (IBB) is up 1.5%