Investors should note RYH’s equal-weight methodology turns up some very different weights compare to XLV at the sub-sector level. For example, XLV has rode the tide of pharmaceuticals and biotech companies, a combined 65.2% of that ETF’s weight.
RYH’s allocation to those industries is 37.5%, but the equal-weight offering ratchets up exposure to health care equipment, providers and services names. The ETF’s weight to health care services providers is almost 26%, about 1,000 basis points above XLV’s weight to that group, and enough to give RYH healthy leverage to sector upside created by Obamacare. [Obamacare Helps This ETF]
Although RYH is lighter on blue chip pharma names compared to its cap-weighted counterparts, the ETF does not short change investors when it comes to high-quality firms with deep competitive advantages.
“RYH also invests in a significant number of high-quality health-care firms, devoting 45% of assets to wide-moat companies, 46% to narrow-moat firms, and just 8% to companies with no economic moat,” according to Goldsborough.
Guggenheim S&P Equal Weight Healthcare ETF