Friday is shaping up to be just another day at the office for biotechnology exchange trade funds. For second consecutive day, biotech ETFs comprise nearly all of the ETFs making new all-time highs.
Today’s new all-time high club is comprised of four of the five major non-leveraged biotech ETFs, the ProShares Ultra Nasdaq Biotechnology (NasdaqGM: BIB), thedouble-leveraged equivalent of the iShares Nasdaq Biotechnology ETF (NasdaqGM: IBB), and two other health care-related ETFs. [Biotech ETFs Prescribe New Highs]
One of those other two ETFs is the PowerShares Dynamic Pharmaceuticals Portfolio (NYSEArca: PJP). Up about 0.8% today, PJP has not only hit a fresh all-time high, but the ETF is closing in on a weekly gain of nearly 6%. Not surprisingly, the ETF’s biotech exposure is proving rewarding.
While its name implies that is a pharmaceuticals ETF and it is, PJP is not limited to a prosaic lineup of blue chip pharma names such as Johnson & Johnson (NYSE: JNJ) and Pfizer (NYSE: PFE). Those names and fellow Dow component Merck (NYSE: MRK) are top-10 holdings in PJP, combining for 14% of the ETF’s weight, but this is also a pharma ETF with an edge. [A Fab Pharma ETF]
That edge is a significant allocation to the biotech industry. Each of the biotech “big four” – Celgene (NasdaqGS: CELG), Amgen (NasdaqGS: AMGN), Gilead Sciences (NasdaqGS: GILD) and Biogen Idec (NasdaqGS: BIIB) – reside among PJP’s top-10 holdings. That quartet represents a combined 20% of the ETF’s weight.
PJP tracks the Dynamic Pharmaceutical Intellidex Index which evaluates companies for inclusion based on “price momentum, earnings momentum, quality, management action, and value,” according to PowerShares.
Said another way, though it is a passively managed ETF, PJP is also a smart beta fund. Its ability to exploit the momentum and quality factors, which has helped create the compelling combination of old school pharma and cutting-edge biotech names under the umbrella of one ETF, has rewarded investors.
Over the past year, PJP has soundly outpaced traditional health care ETFs along with pharma funds with lower allocations to biotech stocks. It is also noteworthy that PJP features a better than 30% weight to small-cap stocks and over the past 12 months, the ETF has surged almost 36% compared to 2% gain for the Russell 2000, which features a 14% health care weight.
Investors are aware of PJP’s advantages. The ETF has added almost $16.1 million in new assets over the past week. Year-to-date, only five PowerShares ETFs have added more new assets than PJP, according to issuer data.
PowerShares Dynamic Pharmaceuticals Portfolio
