Some analysts feel that the biotechnology sector could be a growth story in the next decade. Exchange traded funds (ETFs) that give exposure to this area are an efficient way to play the industry, but how do you choose from the several available?
Biotechnology is a sector that does not rely upon a consumer-driven economy. In fact, it is a way to “own the future” because it is essential to our progress and is not economically dependent, explains Kevin Cook for Onn tv.
Biotechnology ETFs are a good choice for investors who want to own the big players in this industry, because they own many companies, rather than putting all of your bets on just one biotech company. If well-constructed, they offer investors conservative participation in a sector-focused basket of leading companies and they allow you to easily trade the swings, which enhances returns, or change your mind, which enhances control. [What biotech ETFs need for a successful run.]
For more stories about biotechnology, visit our biotechnology category.
- First Trust Amex Biotechnology Fund (NYSEArca: FBT): up 45.9% year-to-date
An equal-weighted biotech ETF, and the best performer in the sector for 2009, FBT is up more than 50% for the year. This ETF has a fair hand for all biotech companies, both large and small, allowing investors to capitalize when a small firm comes up with a big innovation.
- SPDR S&P Biotech (NYSEArca: XBI): up 1.4% year-to-date
XBI holds only 28 stocks and trades fewer than 125,000 shares per day on average. It has many of the same top-10 holdings as IBB and it is an equal-weighted index, meaning each issue is balanced to be roughly the same dollar slice of the fund pie. This gives small-cap stocks more bang in determining the fund’s overall performance.
- iShares NASDAQ Biotechnology (NYSEArca: IBB) up 15.9% year-to-date
IBB holds more than 120 Nasdaq biotech stocks across all market caps, giving investors exposure to top names in the industry. This ETF is a good tool for conservative investors who want efficiency and essential exposure to reputable companies. IBB is that it is market-cap weighted, which means more exposure to big names and less to the small ones. [Why ETFs suit biotechnology sector.]
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.