The Guggenheim S&P Equal Weight Healthcare ETF (NYSEArca: RYH) was one of 2014’s top-performing health care exchange traded funds with a gain of 29.7%.
That topped the average return of 25.3% by the Health Care Select Sector SPDR (NYSEArca: XLV) and the Vanguard Health Care ETF (NYSEArca: VHT), but with the new year here, it could be time to take a fresh technical look at RYH.
Marc Chaikin, founder of Chaikin Analytics, notes that of the nine sector SPDRs, XLV continues to display the most bullish traits. That could prove to be efficacious RYH, the equal-weight answer to XLV. As it is, RYH is already the highest ranked health care ETF by Chaikin’s power metrics.
“RYH has less of a bias to the large cap Health Care stocks; and as small and mid cap companies have reversed their underperformance in the past 6 weeks, the RYH has been a better performer than the XLV. The RYH has the same bullish Power Gauge bias but puts more emphasis on the smaller cap names in the Index. This is important in the current environment as the larger Biotech stocks have been more volatile as they have been buffeted by concerns about pricing pressure from the large managed drug plan providers,” writes Chaikin in a post on Nasdaq.com.
On that note, RYH’s biotech weight is 12.3%, or 800 basis points below XLV’s to the hottest of the hot health care industry groups. While RYH may appear light on biotech names relative to rival health care ETFs, the equal-weight offering bolsters exposure to health care equipment, providers and services names. [Biotech Underweight Not a Problem for This ETF]
“RYH has 20 Bullish-rated Chaikin Power Gauge stocks vs. 4 with Bearish ratings, as indicated by the Chaikin Power Bar for the RYH below. This indicates positive potential for the RYH over the next 3 – 6 months,” according to Chaikin.
Said another way, 20 of RYH’s 55 holdings look like solid bets against just four with the potential to be laggards.
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. The ETF is home to several companies with decades-long dividend increase streaks such as Johnson & Johnson (NYSE: JNJ) and Abbott Labs (NYSE: ABT). RYH’s pharma weight is less than 24% compared to over 44% for XLV. [Time for a Checkup With This Health Care ETF]
Guggenheim S&P Equal Weight Healthcare ETF