Biotechnology appeals to many investors, and with four different exchange traded funds (ETFs) focused on the class, is there a fund that is better than the rest?
The sector is one of the few non-commodity related that’s solidly above its trend line.
Each of the four ETFs within the sector have such different holdings that ranking them is a hard task because there is no common ground to begin.
Here are the four biotech ETFs:
- iShares Nasdaq Biotechnology Index (IBB): Holds all 170 biotech companies within the Nasdaq index. With a market cap over $1 billion, IBB is five times bigger than XBI and PBE. It has an expense ratio of 0.48%. Year-to-date, it’s up 5.3%.
- First Trust Amex Biotech Index (FBT): Concentrated within 20 companies and an expense ratio of 0.60%, FBT is smaller and concentrated. Year-to-date, it’s up 11.4%.
- Biotech SPDR (XBI): Expense ratio is at 0.35% and holds 25 companies, each weighted between 3-5% of the ETF. Year-to-date, it’s up 10.2%.
- PowerShares Dynamic Biotech And Genome (PBE): Expense ratio is at 0.65%, and uses a proprietary selection criteria. The index is based upon fundamental growth, stock valuation, investment timeliness, and risk factors. Most of the top holdings are found in the other ETFs. It’s up 2.1% year-to-date.
Seeking Alpha reminds us that biotech is usually a boom-bust sector and the four ETFs representing the asset class are each different in their diversity. They are all substantial biotech investments, depending upon what you need for your specific portfolio. Tom Lydon talked about biotech earlier this week on CNBC.
He also spoke with Rob Wherry for Smart Money about trends in biotechnology and other areas.
For full disclosure, some of Tom Lydon’s clients own shares of IBB.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.