Biotechnology exchange traded funds are extending what is an impressive 2017 resurgence after the group faltered last year. iShares Nasdaq Biotechnology ETF (NASDAQGM:IBB), the largest biotechnology exchange traded fund by assets, rose more than 2% last week, bringing its year-to-date gain to almost 22%.
Biotech ETFs soared even after it became apparent Senate Republicans’ efforts to replace the Affordable Care Act, also known as Obamacare, are stalling. Healthcare stocks are also showing attractive valuations relative to other defensive sectors, which are richly valued.
Biotechnology historically trades at multiples that are elevated relative to broader benchmarks, but after last year’s of struggles for biotechnology names, some analysts see value with some big-name biotech stocks.
IBB, which holds nearly 190 stocks and is a cap-weighted ETF, has a price-to-earnings ratio of just over 21 and a price-to-book ratio of 4.92. The ETF’s three-year standard deviation is just over 25 percent.
Regarding IBB, “eight members of the ETF have double digit gains this week, including Vertex, up nearly 32 percent in its highest performing week since June 2014, when the biopharma company gained 44.35 percent in a week,” reports CNBC.
ETF traders who are betting big on the biotechnology sector rebound have also utilized leveraged long options including the Direxion Daily S&P Biotech Bull Shares (NYSEArca:LABU), which takes the 3x or 300% daily performance of the S&P Biotechnology Select Industry Index.
With its positive close on Friday, IBB notched “a third consecutive weekly gain for the first time since mid-February. This would also be the best week for the ETF since the week of June 23, when it gained 9.57 percent,” according to CNBC.
Related: Why Biotechnology Investing is Looking Healthy
Investors are inching into IBB this quarter as the ETF’s third-quarter inflows, as of July 20th, were just $1.1 million. However, the ETF has added $650 million in new assets on a year-to-date basis. Each of the three largest biotechnology ETFs, including IBB, have seen inflows this year.
Other options include the ProShares UltraPro Nasdaq Biotechnology (NasdaqGM:UBIO), which takes the 3x daily performance of the Nasdaq Biotechnology Index, and the ProShares Ultra Nasdaq Biotechnology (NasdaqGM:BIB), which takes the 2x performance of the same benchmark.
For more information on the healthcare sector, visit our healthcare category.