ETF Trends publisher Tom Lydon discussed the PowerShares S&P SmallCap Energy Portfolio (NasdaqGM: PSCH) on this week’s “ETF of the Week” podcast with Chuck Jaffe on the MoneyLife Show.

Invesco S&P SmallCap Health Care ETF (PSCH)

  • The best long, equity ETF of 2018
    • PSCH +30.2% YTD
    • S&P 500 +2.6% YTD
  • Smaller Healthcare Companies Develop Innovative Solutions
    • smaller companies have been developing innovative solutions and producing incremental advances that may offer potential growth opportunities, especially with steady merger and acquisition activity.
      • Premiums on health care deals are also holding, with almost 30% of deals this year commanding premiums of 40% to 50%, mirroring premiums paid last year.
      • Businesses are expanding their product lines through acquisitions as they face increased competition and look to new merchandise to raise sales
    • More companies may continue to capitalize on the ongoing low interest rate environment and engage in greater merger and acquisitions, or at least try to squeeze out some deals before the Federal Reserve decides to hike rates again.
    • Financing remains cheap and companies are still sitting on huge cash stores, which may be put to use in expanding their portfolios.
  • Small-caps outperforming in general
    • The small-cap category has also been outperforming on encouraging domestic economic fundamentals
      • the U.S. experiences strong employment numbers, rising consumer spending and strong consumer confidence.
      • The smaller companies are better positioned to capitalize on the domestic growth.
    • small-caps are insulated from international headwinds
      • especially in an environment gripped by fears of potential trade wars, tariff concerns, rising geopolitical risks and a strengthening U.S. dollar.
  • Invesco S&P SmallCap Health Care ETF
    • focuses on biotechnology, pharmaceutical, medical device and healthcare facilities on the smaller end of the size spectrum.
    • the fund tries to reflect the performance of the S&P SmallCap 600 Capped Health Care Index.
    • The portfolio includes 28.0% health care providers & services, 27.8% health care equipment & supplies, 21.8% biotech, 12.7%, pharma, 6.8% health care tech and 2.8% life sciences tool & services.
    • Top holdings include Neogen 4.2%, Ligand Pharma 4.1%, HealthEquity 4.1%, Inogen 3.2% and Supernus Pharma 3.0%
    • Heavy growth tilt: 49.5% small-cap growth, 27.4% mid-cap growth

For more podcast episodes featuring Tom Lydon, visit our podcasts page.

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