When investors are looking for more aggressive rates of growth, biotech stocks typically represent some of the best opportunities for rapid appreciation. These companies spend a plethora of time and massive amounts of money to fund breakthrough biological treatments and diagnostic tools. Blossoming developments can literally change their fortunes, and the fortunes of shareholders overnight.
Of course, this type of growth comes at a cost, and this risk scenario puts biotech stocks on the backburner when the market is volatile and investors are fearful, like in the case of a trade war. But for those investors looking to diversify a portfolio or to add some growth stocks, a biotech ETF is an often safer way to engage with the biotech sector. Here are 8 of the best biotech ETFs for 2019 performing so far year-to-date, as of May 28:
1. ARK Genomic Revolution Multi-Sector ETF (ARKG) – Up 27.31% YTD
ARKG reaches across multiple sectors and geographies for companies that the advisor believes will benefit from innovations in the genomics-related industry. The reality is almost all of its holdings are in US healthcare-related companies, with biotech naturally leading the way. This is a niche fund that charges a high fee for its actively managed strategy. Because it doesn’t match well with our biotech benchmark, investors should look closely at where the fund makes its bets. It is an interesting concept and there is good performance potential, but the fund’s growth has been lackluster since inception. Liquidity is thin and spreads are often wide. Interested block traders will most likely have to work with the issuer, as underlying liquidity is lacking. The fund charges a high fee, though typical for an actively managed fund, and investors should consider closure risk before jumping in. The expense ratio is 0.75%.
2. Virtus LifeSci Biotech Clinical Trials ETF (BBC) – Up 19.4% YTD
The investment seeks investment results that correspond, before fees and expenses, to the price and yield performance of the LifeSci Biotechnology Clinical Trials Index. Under normal market conditions, the fund will invest not less than 80% of its assets in component securities of the index. The index seeks to track the performance of the common stock of U.S. exchange-listed biotechnology companies with a primary product offering (“lead drug”) that is typically in a Phase 1, Phase 2 or Phase 3 clinical trial stage of development, but prior to receiving marketing approval. The expense ratio is 0.79%.
3. SPDR S&P Biotech ETF (XBI) – Up 15.55% YTD
The SPDR® S&P® Biotech ETF seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P® Biotechnology Select IndustryTM Index (the “Index”) The fund seeks to provide exposure to the Biotechnology segment of the S&P TMI, which comprises the following sub-industries: Biotechnology. XBI seeks to track a modified equal weighted index which provides the potential for unconcentrated industry exposure across large, mid and small cap stocks. The ETF allows investors to take strategic or tactical positions at a more targeted level than traditional sector based investing. The expense ratio is a more modest 0.35% compared to other ETFs in its sector.
4. Virtus LifeSci Biotech Products ETF (BBP) – Up 14.08% YTD
The investment seeks investment results that correspond, before fees and expenses, to the price and yield performance of the LifeSci Biotechnology Products Index. Under normal market conditions, the fund will invest not less than 80% of its assets in component securities of the index. The index seeks to track the performance of the common stock of U.S. exchange-listed biotechnology companies with at least one drug therapy approved by the U.S. Food and Drug Administration (“FDA”) for marketing. The expense ratio is 0.79%.
5. VanEck Vectors Biotech ETF (BBH) – Up 8.83% YTD
VanEck Vectors® Biotech ETF (BBH) seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MVIS® US Listed Biotech 25 Index (MVBBHTR), which is intended to track the overall performance of companies involved in the development and production, marketing and sales of drugs based on genetic analysis and diagnostic equipment. The expense ratio is lower at 0.35%.
6. iShares Nasdaq Biotechnology ETF (IBB) Up 8.06% YTD
The iShares Nasdaq Biotechnology ETF seeks to track the investment results of an index composed of biotechnology and pharmaceutical equities listed on the NASDAQ. IBB offers exposure to U.S. biotechnology and pharmaceutical companies. The ETF provides targeted access to biotechnology and pharmaceutical stocks listed on the NASDAQ. The expense ratio is in the middle of the road at 0.47%.
7. First Trust Amex Biotechnology Index (FBT) – 6.67% YTD
The investment seeks investment results that correspond generally to the price and yield (before the fund’s fees and expenses) of an equity index called the NYSE Arca Biotechnology IndexSM. The fund will normally invest at least 90% of its net assets (including investment borrowings) in the common stocks and depositary receipts that comprise the index. The index is an equal-dollar weighted index designed to measure the performance of a cross section of small, mid and large capitalization companies in the biotechnology industry that are primarily involved in the use of biological processes to develop products or provide services. The expense ratio is 0.57%.
8. Invesco Dynamic Biotechnology & Genome ETF (PBE) – Up 6.37% YTD
The Invesco Dynamic Biotechnology & Genome ETF (Fund) is based on the Dynamic Biotech & Genome Intellidex℠ Index (Intellidex Index). The Fund will normally invest at least 90% of its total assets in the securities that comprise the Index. The Intellidex Index is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including price momentum, earnings momentum, quality, management action, and value. The Underlying Intellidex Index is comprised of securities of 30 US biotechnology and genome companies. These are companies that are principally engaged in the research, development, manufacture and marketing and distribution of various biotechnological products, services and processes and companies that benefit significantly from scientific and technological advances in biotechnology and genetic engineering and research. The Fund and the Index are rebalanced and reconstituted quarterly in February, May, August and November. The expense ratio is 0.59%.