One obvious difference between the two ETFs is that XLV is a cap-weighted ETF, ideal for the investor looking heavy exposure to blue chip pharmaceuticals stocks along with some well-portioned biotech and medical device exposure. On the other hand, FXH is one of the jewels of First Trust’s AlphaDEX lineup, a group of ETFs whose holdings are selected based on “growth factors including three, six and 12-month price appreciation, sales to price and one year sales growth, and, separately, on value factors including book value to price, cash flow to price and return on assets,” according to First Trust.
Interestingly, overlap between the two ETFs has modestly increased. When we looked at the two funds in October, the overlap was this: “Eighty percent of XLV’s 55 holdings are found in FXH while 59% of FXH’s constituents also reside in XLV.”
However, the differences between XLV and FXH are enough to be felt in terms of returns. Over the past year, including paid dividends, XLV is ahead of its smart beta rival by 320 basis points. Over the past three years, FXH, with slightly higher volatility, is ahead of XLV by 660 basis points.
XLV vs. FXH
Tables Courtesy: AltaVista Research