Investors in any of the four major biotechnology ETFs are no doubt looking for an August sequel to July’s stellar performances. Even if August only turns out to be half as good for biotech ETFs, investors are likely to be satisfied.
Amid a flurry of interesting new drug filings, strong earnings reports and positive clinical trial results, the SPDR S&P Biotechnology ETF (NYSEArca: XBI) was one of the top-performing non-leveraged ETFs of any type last month, posting a gain of nearly 16%. The rival iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB), the largest biotech ETF by assets, was no slouch with a July gain of 11%. [July ETF Performance Report]
July was not a one-off affair for the biotech sector. As health care stocks have been soaring this year, IBB, XBI and rival biotech ETFs have established themselves as clear-cut leaders at the sub-sector level. IBB, which is heavy on large-caps such as Amgen (NasdaqGM: AMGN) and Celgene (NasdaqGM: CELG), is up over 44% year-to-date. XBI, which uses more of an equal-weight approach, has surged nearly 40% since the start of 2013. [Positive Prognosis for Biotech ETFs]
Those are not even the best performances delivered by biotech ETFs this year. The Market Vectors Biotech ETF (NYSEArca: BBH) has jumped almost 48%. BBH is heavily allocated to biotech’s four largest names: Amgen, Celgene, Gilead (NasdaqGM: GILD) and Biogen (NasdaqGM: BIIB). BBH was up 10.6% last month.
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. With a median market value of around $6.4 billion, the First Trust NYSE Arca Biotechnology Index Fund (NYSEArca: FBT) is an example of an biotech ETF with less leverage to the group’s largest companies. [Why Biotech ETFs Are a Top Sector Play]
FBT is the “laggard” among biotech ETFs with a 38.7% year-to-date gain. Investors were not shy about pouring cash into biotech funds in July, either. Combined, BBH, FBT and IBB took in over $486 million in new assets, according to Index Universe data. Surprisingly, XBI saw outflows of $22 million.
SPDR S&P Biotech ETF
ETF Trends editorial team contributed to this post.
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.