Pharmaceutical stocks and sector-related exchange traded funds have enjoyed a great summer and the rally may continue to have legs.

Over the past three months, the PowerShares Dynamic Pharmaceuticals Portfolio (NYSEArca: PJP) gained 11.4%, SPDR Pharmaceuticals ETF (NYSEArca: XPH) increased 18.0% and iShares U.S. Pharmaceuticals ETF (NYSEArca: IHE) advanced 12.8%. Meanwhile, the broader iShares Nasdaq Biotechnology ETF (NASDAQGM: IBB) rose 10.6%.

There were no clear catalysts to explain the rally as we did not witness any memorable earnings beats, new clinical trials or large-scale deals, the Wall Street Journal reports. However, the lack of a clear instigating factor does not mean the sector is due to retreat.

Pharmaceutical sector valuations remain relatively attractive even after the recent run up. For instance, PJP shows a price-to-earnings ratio of 12.8, XPH trades at a 12.4 P/E and IHE has a 14.0 P/E. In contrast, the S&P 500 is hovering around a 17.1 P/E.

There aren’t any looming negatives that would diminish the earnings outlook either.

Subscribe to our free daily newsletters!
Please enter your email address to subscribe to ETF Trends' newsletters featuring latest news and educational events.