More recently, inversions have occurred after large U.S. companies merged with smaller foreign firms. The U.S. company would reincorporate in a tax-friendlier country, like Ireland, while maintaining much of their core operations in the U.S. [Inversion Debate Affects Health Care ETFs]
Investors should note a Pfizer move on Actavis is not the only inversion-related deal that could affect pharma ETFs. AbbVie (NYSE: ABBV), which agreed to acquire Dublin-based Shire (NasdaqGS: SPHG), fell Tuesday on inversion news. AbbVie and Shire combine for 8.4% of PPH’s weight.
The PowerShares DWA Healthcare Momentum Portfolio (NYSEArca: PTH) has an almost 4.7% weight to Actavis. Although the ETF, one backed by a strategy that focuses on identifying stocks with impressive relative strength, is chock full of takeover, its current roster offers less inversion risk than some other health care ETFs. PTH has remained durable in the face of increased inversion talk, gaining 3% over the past month.
Market Vectors Pharmaceutical ETF
ETF Trends editorial team contributed to this post.