Healthcare ETFs have been displaying positive momentum. One healthcare ETF that is based on momentum traits is the PowerShares DWA Healthcare Momentum Portfolio (NASDAQ: PTH), which hit an all-time high last Friday.
PTH, which turns 12 years old in October, follows the Dorsey Wright Healthcare Technical Leaders Index.
“The Index is designed to identify companies that are showing relative strength (momentum), and is composed of at least 30 common stocks from the NASDAQ US Benchmark Index. Relative strength is the measurement of a security’s performance in a given universe over time as compared to the performance of all other securities in that universe,” according to PowerShares.
The $204.2 million PTH currently holds 52 stocks. Applying the momentum factor to the healthcare sector can result in funds emphasizing smaller stocks as highlighted by an average market value of $15.5 billion for PTH’s holdings.
Momentum Catalysts for Healthcare
Industry observers argue that medical technology companies can tap into increased healthcare spending among emerging economies while the U.S. market has matured and could experience slower growth. Looking ahead, in the years through 2024, spending growth is projected to average 5.8% and peak at 6.3% in 2020.
PTH allocates over 31% of its roster to healthcare equipment and supplies manufacturers. The ETF also devotes over 48% of its weight to biotech stocks, which could prove beneficial going forward.
Helping the sector’s prospects is a speedier approval process by the U.S. Food and Drug Administration. In 2012, the FDA was given the authority to designate certain drugs as a ‘breakthrough therapy,’ which then allowed that drug to move through the approval processes more quickly,” said Morningstar.