Health care exchange traded funds started 2014 in fine fashion, lead in large part by ebullience toward biotechnology stocks carried over from 2013.
Last year was the third consecutive year in which at least one biotech ETF ranked among the year’s 10 best non-leveraged ETFs. In 2013, the iShares Nasdaq Biotechnology ETF (NYSEArca: IBB) and the Market Vectors Biotech ETF (NYSEArca: BBH) fought for top honors among health care funds, each posting gains north of 64%. [Duel to be the Best Health Care ETF]
Soaring biotech issues were among the catalysts that helped the Health Care Select Sector SPDR (NYSEArca: XLV) rank as the second-best of the nine sector SPDRs through the first two months of the year. Then came the biotech sell-off. [Investors Depart Biotech ETFs]
From its February peak to its April nadir, IBB, the largest biotech ETF, slumped over 21%, entering a bear market along the way. XLV, which currently has an 18.3% allocation to the biotech industry, experienced a more modest decline of 7.1% from its March high to its April low.
It could be time for XLV, the largest health care ETF, to reclaim its old highs.
“XLV has held up well as of late, but the recent downtrend line breakout was on very light volume with Thursday’s action closing below the 50-day MA on a pick up in volume,” according to Deron Wagner of Morpheus Trading Group.
Wagner notes XLV could give back some of its recent gains if it falls below $57, but the ETF is up 2.3% in the past month, not far off the 3% gained by IBB over the same time. Importantly, it is more than just biotech stocks that have helped keep XLV and related ETFs sturdy.
Just four of the 30 members of the Dow Jones Industrial Average are up at least 10% year-to-date, but two – Johnson & Johnson (NYSE: JNJ) and Merck (NYSE: MRK) – combine for over 20% of XLV’s weight.
Investors have stuck by more conservative health care ETFs like XLV despite the tumult among biotech stocks. XLV has attracted over $45 million in assets since start of the second quarter, which comes after nearly $414 million in first-quarter inflows. [Health Care ETFs Endure Biotech Slump]
Health Care Select Sector SPDR
