Over the last several years, there has rarely been a bad time to own biotechnology exchange traded funds. That much is confirmed by the presence of multiple biotech ETFs on the annual lists of the top 10 sector funds.
In 2014, each of the five major biotech ETFs ranked among the year’s top 10 sector ETFs. That includes the First Trust NYSE Arca Biotechnology Index Fund (NYSEArca: FBT), SPDR S&P Biotech ETF (NYSEArca: XBI) and the PowerShares Dynamic Biotechnology & Genome Portfolio (NYSEArca: PBE) being the year’s top three sector ETFs. [Dominating Health Care ETFs]
From 2011 through 2014, an average of three biotech ETFs per year were found among each year’s 10 best sector ETFs.
As is the case with an array of other sectors, biotech has some favorable seasonal stretches and the group is in the midst of one such stretch. December is the second-best month of the year for the broader biotech sector after July, but due to the arrival of multiple industry conferences this month, January is often kind to biotech stocks as well. Over the past 20, years the biotech sector has posted an average January gain of 3.1%, rising in 65% of those Januarys, according to EquityClock.com.
“The Biotech sector has a history of moving higher in anticipation of major conferences where biotech companies have an opportunity to announce results of research on new biotech products and services,” writes Don Vialoux for The Globe and Mail.
The aforementioned ETFs along with the iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB) and the Market Vectors Biotech ETF (NYSEArca: BBH) merit immediate consideration because at least two industry conferences are imminent. As one example, the 33rd annual J.P. Morgan Healthcare Conference starts on Jan. 12, lasting until Jan. 15.
In January 2014, IBB, the largest biotech ETF, surged 8.3%. Investors are already preparing for a big January from biotech ETFs as highlighted by the more than $485 million of inflows to IBB over the past month.
Investors looking for a more conservative way to play a possible biotech bounce this month can opt for the Health Care Select Sector SPDR (NYSEArca: XLV). Not only does XLV, the largest health care ETF by assets, allocate 20.4% of its weight to biotech stocks, bu the ETF is historically the top performer among the nine sector SPDRs in the month of January. [Best Sector ETF Ideas for January]
iShares Nasdaq Biotechnology ETF