Pharmaceuticals stocks and exchange traded funds are performing well this year, but some pharmaceuticals ETFs are lagging the performances turned in by broad, diversified healthcare funds. Still, investors should be dismissive of pharmaceuticals investments and their potential to deliver upside in the second half of 2017.
The PowerShares Dynamic Pharmaceuticals Portfolio (NYSEArca:PJP) could be a leader should pharmaceuticals ETFs regain their momentum.
PJP is a departure from the traditional market capitalization-weighted health care ETF in that its underlying index evaluates companies for inclusion based on “price momentum, earnings momentum, quality, management action, and value,” according to PowerShares. Translation: PJP is a smart beta play on an industry group that is mostly capitalization-weighted in the world of ETFs.
“The pharmaceutical industry has lagged in recent years, due in part to political uncertainty, which has kept a lid on company share prices,” said PowerShares in a recent note. “Provided lawmakers can produce the votes, the proposed House and Senate health care bills could ease some of that uncertainty — setting up a possible ‘sell the rumor, buy the fact’ backdrop, as investors move beyond market noise and focus on company fundamentals. With uncertainty already priced in, I believe that the pharmaceutical industry could finally be poised for a breakthrough if current trends hold.”