The biotechnology sector has positive long term implications and the indecision that loomed over the industry has subsided, according to S&P Capital. Exchange traded funds that track this sector are a sound choice for risk mitigation while gaining exposure to growth going forward.
“Now unlikely to be repealed, health-care reform means some positive and negative things for the drug industry. Medicaid will start covering more people in 2014, which should be a positive for volumes and the drug industry. On the negative side, higher rebates already are in place for Medicaid patients, which are bad for biotechs because they mean biotechs see lower net prices for their drugs,” Robert Goldsborough wrote for Morningstar. [Why Biotech is a Top Performing Sector in 2012]
ETFs have become the most efficient manner to invest in the biotechnology industry. Since many of the companies are small- or mid-cap and are generally start-ups, ETFs can mitigate risk while allowing investors exposure to any upside. [Investors Clamor for Generic Drug ETF]
The SPDR S&P Biotech (NYSEArca: XBI) has gained roughly 30% over the past year ended April 30, 2013. The fund has 100% of holdings in the biotech industry. [Election Could Make or Break Health Care ETFs]
The iShares Nasdaq Biotechnology Index Fund (NYSEArca: IBB) has returned 42.81% for the year ended April 30, 2013. The ETF offers exposure to biotechnology and the pharmaceutical industry. IBB is currently rated “Marketweight”.