Investors looking for more focused pharma exposure can opt for an ETF such as the iShares U.S. Pharmaceuticals ETF (NYSEArca: IHE), which also garnered an overweight rating from S&P. Pfizer, Merck, Bristol-Myers and Lily are IHE’s second- through fifth-largest holdings, respectively, combining for nearly 32% of the fund’s weight.
The SPDR Pharmaceuticals ETF (NYSEArca: XPH) is more of an equal-weight spin on the pharmaceuticals sub-sector as it veers away from heavy allocations to blue-chip large-caps in an effort to integrate mid- and small-cap growth names.
S&P rates XPH marketweight, the same rating it bestowed on the PowerShares Dynamic Pharmaceuticals Portfolio (NYSEArca: PJP). PJP is smart-beta play on pharma stocks as its 29 holdings are selected based on price momentum, earnings momentum, quality, management action, and value. Bristol-Myers, Gilead, Merck and Pfizer combine for 19.2% of PJP’s weight. [Politics Could Lift Pharma ETFs]
While biotech and broader health care ETFs often command more attention than their pharma-focused peers, pharma funds have outpaced broader health care ETFs to start 2014. For example, XLV and IYH are up an average of 3.2% while IHE, PJP and XPH are higher by an average of 5.3%.
SPDR Pharmaceuticals ETF
Tom Lydon’s clients own shares of Pfizer.