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Is SPDR S&P Pharmaceuticals ETF (XPH) a Strong ETF Right Now?
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Launched on 06/19/2006, the SPDR S&P Pharmaceuticals ETF (XPH - Free Report) is a smart beta exchange traded fund offering broad exposure to the Health Care ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
XPH is managed by State Street Global Advisors, and this fund has amassed over $236.35 million, which makes it one of the average sized ETFs in the Health Care ETFs. Before fees and expenses, XPH seeks to match the performance of the S&P Pharmaceuticals Select Industry Index.
The S&P Pharmaceuticals Select Industry Index represents the pharmaceuticals sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the US common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Pharmaceuticals Index is a modified equal weight index.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for XPH are 0.35%, which makes it one of the least expensive products in the space.
The fund has a 12-month trailing dividend yield of 1.49%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
XPH's heaviest allocation is in the Healthcare sector, which is about 100% of the portfolio.
Taking into account individual holdings, Eli Lilly And Company (LLY - Free Report) accounts for about 4.74% of the fund's total assets, followed by Royalty Pharma Plc Class A (RPRX - Free Report) and Jazz Pharmaceuticals Public Limited Company (JAZZ - Free Report) .
Its top 10 holdings account for approximately 43.84% of XPH's total assets under management.
Performance and Risk
Year-to-date, the SPDR S&P Pharmaceuticals ETF has lost about -0.21% so far, and is down about -1.39% over the last 12 months (as of 05/18/2023). XPH has traded between $38.51 and $44.52 in this past 52-week period.
The ETF has a beta of 0.84 and standard deviation of 21.37% for the trailing three-year period, making it a high risk choice in the space. With about 42 holdings, it has more concentrated exposure than peers.
Alternatives
SPDR S&P Pharmaceuticals ETF is not a suitable option for investors seeking to outperform the Health Care ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
IShares U.S. Pharmaceuticals ETF (IHE - Free Report) tracks Dow Jones U.S. Select Pharmaceuticals Index and the VanEck Pharmaceutical ETF (PPH - Free Report) tracks MVIS US Listed Pharmaceutical 25 Index. IShares U.S. Pharmaceuticals ETF has $377.63 million in assets, VanEck Pharmaceutical ETF has $416.68 million. IHE has an expense ratio of 0.39% and PPH charges 0.36%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Health Care ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Is SPDR S&P Pharmaceuticals ETF (XPH) a Strong ETF Right Now?
Launched on 06/19/2006, the SPDR S&P Pharmaceuticals ETF (XPH - Free Report) is a smart beta exchange traded fund offering broad exposure to the Health Care ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
XPH is managed by State Street Global Advisors, and this fund has amassed over $236.35 million, which makes it one of the average sized ETFs in the Health Care ETFs. Before fees and expenses, XPH seeks to match the performance of the S&P Pharmaceuticals Select Industry Index.
The S&P Pharmaceuticals Select Industry Index represents the pharmaceuticals sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the US common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Pharmaceuticals Index is a modified equal weight index.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for XPH are 0.35%, which makes it one of the least expensive products in the space.
The fund has a 12-month trailing dividend yield of 1.49%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
XPH's heaviest allocation is in the Healthcare sector, which is about 100% of the portfolio.
Taking into account individual holdings, Eli Lilly And Company (LLY - Free Report) accounts for about 4.74% of the fund's total assets, followed by Royalty Pharma Plc Class A (RPRX - Free Report) and Jazz Pharmaceuticals Public Limited Company (JAZZ - Free Report) .
Its top 10 holdings account for approximately 43.84% of XPH's total assets under management.
Performance and Risk
Year-to-date, the SPDR S&P Pharmaceuticals ETF has lost about -0.21% so far, and is down about -1.39% over the last 12 months (as of 05/18/2023). XPH has traded between $38.51 and $44.52 in this past 52-week period.
The ETF has a beta of 0.84 and standard deviation of 21.37% for the trailing three-year period, making it a high risk choice in the space. With about 42 holdings, it has more concentrated exposure than peers.
Alternatives
SPDR S&P Pharmaceuticals ETF is not a suitable option for investors seeking to outperform the Health Care ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
IShares U.S. Pharmaceuticals ETF (IHE - Free Report) tracks Dow Jones U.S. Select Pharmaceuticals Index and the VanEck Pharmaceutical ETF (PPH - Free Report) tracks MVIS US Listed Pharmaceutical 25 Index. IShares U.S. Pharmaceuticals ETF has $377.63 million in assets, VanEck Pharmaceutical ETF has $416.68 million. IHE has an expense ratio of 0.39% and PPH charges 0.36%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Health Care ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.