FXH also features a significant underweight to pharmaceuticals makers compared to cap-weighted health care ETFs. That is to say investors should not expect an ETF heavy on Johnson & Johnson (NYSE: JNJ), Pfizer (NYSE: PFE) and friends with this fund. FXH’s weight to pharma companies is just 18.4%, compared to 44.2% for XLV.
On that note, investors should also that several of FXH’s pharma holdings are more growth than value plays. The ETF’s top-two holdings are Mallinckrodt (NYSE: MNK) and Salix Pharmaceuticals (NasdaqGS: SLXP). The former is one of the most heavily shorted stocks on Wall Street, the latter has been mentioned as a takeover target. Both are considered hedge fund darlings. [ETFs for Hedge Fund Pharma Darlings]
“FXH has a slightly lower tilt toward quality companies than its market-cap-weighted brethren; some 22% of FXH’s assets are invested in wide-moat firms, and another 39% are invested in narrow-moat companies. FXH charges 0.70%. Morningstar’s analysts do not cover enough of the firms held in FXH to develop an estimate of fair value,” according to Goldsborough.
FXH has also benefited from the resurgence of biotech stocks with a 15.4% weight to that industry group. That biotech weight is 570 basis points less than XLV’s allocation to the group. However, FXH has teamed with the First Trust NYSE Arca Biotechnology Index Fund (NYSEArca: FBT) to drive the First Trust Dorsey Wright Focus 5 Fund (NasdaqGM: FV) higher in recent weeks. FV is up 5% in just the past month due in large part to its combined 43.6% weight to FBT and FXH. [Momentum Rebound Lifts This ETF]
First Trust Health Care AlphaDEX Fund
