Some exchange traded funds that build their equity lineups based on stocks that frequently appear in 13F filings, so-called guru ETFs, feature solid exposure to the healthcare sector. Of course, that is the result of hedge funds continuing to load up on healthcare names as the sector continues to be the best-performing group in the S&P 500.
“Not only has the health care sector been the best performer in the S&P 500 index, rising 8.3% year-to-date through May 15, but it was also the most actively purchased sector by the ten largest hedge funds, according to recent research from S&P Capital IQ,” said the research firm. “The top bought sector in the first quarter of 2015 for the 10 hedge funds is health care with net buys totaling $4.8 billion, equal to the next four largest sectors combined.”
Interestingly, the $278.1 million Global X Guru Index ETF (NYSEArca: GURU), which includes high conviction picks taken from a select pool of hedge fund 13F information, is light on healthcare names relative to rival ETFs. [ETFs for Your Inner Hedge Fund Hero]
At the end of the first quarter, GURU’s healthcare weight was just 2.5%, making it the smallest sector weight in the ETF. No healthcare stocks are currently found among GURU’s top 10 holdings. Conversely, the rival AlphaClone Alternative Alpha ETF (NYSEArca: ALFA) features Valeant Pharmaceuticals (NasdaqGS: VRX) and Biogen (NasdaqGS: BIIB) among its top 10 holdings.
According to S&P Capital IQ, Valeant was the top buy and the top sell among hedge funds in the first quarter with the $3.7 billion in purchases and $1.4 billion in sells.
Seven other healthcare stocks that combine for over 8% of ALFA’s weight are also found in the ETF. The $146.7 million ALFA “tracks the performance of US-traded equity securities to which hedge funds and institutional investors have disclosed significant exposure,” according to AlphaClone.
“AlphaClone uses a proprietary “Clone Score” methodology to aggregate on a quarterly basis the ideas of hedge funds for which historically it has made the most sense to follow based on their disclosures. AlphaClone’s clone score for each manager is based on the monthly returns in excess of a broad market index and a fixed hurdle rate exhibited by the manager’s follow strategies over time,” according to S&P Capital IQ. [ETFs: Better Ways to Hedge Funds]
The research firm has a marketweight rating on GURU and does not rate ALFA.
ALFA and GURU are not the only guru ETFs boosting exposure to healthcare stocks. Earlier this month, the managers of the Validea Market Legends ETF (NasdaqGM: VALX), an actively managed exchange traded fund, that selects and scores stocks using proprietary models based on the approaches of famous investors such as Warren Buffett and Peter Lynch, said that ETF has increased its biotech and healthcare exposure. [Market Legends ETF ups Healthcare Exposure]
Validea added to VALX stakes in Dow component Merck (NYSE: MRK) and biotech giants Gilead Sciences (NasdaqGS: GILD) and Celgene (NasdaqGS: CELG).
Last week, it was reported that the Direxion iBillionaire Index ETF (NYSEArca: IBLN) has also increased its healthcare weight. Following its most recent rebalance, iBillionaire Inc.’s iBillionaire Index (BILLIONR), IBLN’s underlying benchmark, allocates 23.3% of its weight to healthcare stocks, tying the sector with technology as the index’s second largest sector weight. New additions to IBLN, include three healthcare names; Endo International (NasdaqGS: ENDP), Humana (NYSE: HUM) and McKesson (NYSE: MCK).
AlphaClone Alternative Alpha ETF
