Access Small Cap Opportunities in Health Care With PSCH

The broad health care sector was a strong outperformer as front line workers became the focus of attention amid the Covid-19 pandemic. Small cap equities have been gaining as of late, posting a strong November, which brings us to an ETF that combines the worlds of health care and small caps: The Invesco S&P SmallCap Health Care ETF (PSCH).

The fund is up almost 30% this year and with a 0.29% expense ratio, you get the gains of a boss without paying the cost. The fund has been a strong performer for the last 3 years as well, churning out an almost 20% gain.

“The Invesco S&P SmallCap Health Care ETF (PSCH) was launched on April 7, 2010, and is a passively managed exchange traded fund designed to offer broad exposure to the Healthcare – Broad segment of the equity market,” a Zacks Equity Research article in Yahoo Finance explained. “Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.”

“Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors,” the article added further. “Healthcare – Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 13, placing it in bottom 19%.”

PSCH Chart

PSCH data by YCharts


Under the Hood of PSCH

Modern medicine certainly came to the forefront this year, but it’s a space that will see further strength in the future. Small cap companies can expose investors to companies that are creating the latest and greatest in modern medicine.

“ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund’s holdings before investing,” the Zacks article said. “Most ETFs are very transparent products and many disclose their holdings on a daily basis. Looking at individual holdings, Neogenomics Inc (NEO) accounts for about 5.59% of total assets, followed by Omnicell Inc (OMCL) and Amn Healthcare Services Inc (AMN). The top 10 holdings account for about 34.17% of total assets under management.”

Technically speaking, the fund is up past its 50- and 200-day moving average thanks to a strong November for small caps. PSCH is already within overbought levels based on its 6-month chart, but a year-end sell-off could bring it down for an entry point for patient buyers.

PSCH Chart

PSCH data by YCharts

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