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Is Invesco Pharmaceuticals ETF (PJP) a Strong ETF Right Now?
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A smart beta exchange traded fund, the Invesco Pharmaceuticals ETF (PJP - Free Report) debuted on 06/23/2005, and offers broad exposure to the Health Care ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by Invesco. PJP has been able to amass assets over $260.81 million, making it one of the average sized ETFs in the Health Care ETFs. This particular fund, before fees and expenses, seeks to match the performance of the Dynamic Pharmaceutical Intellidex Index.
The Dynamic Pharmaceutical Intellidex Index is comprised of stocks of U.S. pharmaceutical companies. It is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including fundamental growth, stock valuation, investment timeliness and risk factors.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.56% for PJP, making it on par with most peer products in the space.
PJP's 12-month trailing dividend yield is 1.04%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Healthcare sector - about 100% of the portfolio.
Taking into account individual holdings, Amgen Inc (AMGN - Free Report) accounts for about 6.45% of the fund's total assets, followed by Eli Lilly & Co (LLY - Free Report) and Abbvie Inc (ABBV - Free Report) .
The top 10 holdings account for about 55.25% of total assets under management.
Performance and Risk
The ETF has lost about -8.10% so far this year and is down about -2.67% in the last one year (as of 10/19/2023). In the past 52-week period, it has traded between $70.78 and $81.07.
The fund has a beta of 0.65 and standard deviation of 16.32% for the trailing three-year period, which makes PJP a high risk choice in this particular space. With about 25 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco Pharmaceuticals ETF is a reasonable option for investors seeking to outperform the Health Care ETFs segment of the market. However, there are other ETFs in the space which investors could 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 $355.38 million in assets, VanEck Pharmaceutical ETF has $423.03 million. IHE has an expense ratio of 0.40% 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 Invesco Pharmaceuticals ETF (PJP) a Strong ETF Right Now?
A smart beta exchange traded fund, the Invesco Pharmaceuticals ETF (PJP - Free Report) debuted on 06/23/2005, and offers broad exposure to the Health Care ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by Invesco. PJP has been able to amass assets over $260.81 million, making it one of the average sized ETFs in the Health Care ETFs. This particular fund, before fees and expenses, seeks to match the performance of the Dynamic Pharmaceutical Intellidex Index.
The Dynamic Pharmaceutical Intellidex Index is comprised of stocks of U.S. pharmaceutical companies. It is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including fundamental growth, stock valuation, investment timeliness and risk factors.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.56% for PJP, making it on par with most peer products in the space.
PJP's 12-month trailing dividend yield is 1.04%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Healthcare sector - about 100% of the portfolio.
Taking into account individual holdings, Amgen Inc (AMGN - Free Report) accounts for about 6.45% of the fund's total assets, followed by Eli Lilly & Co (LLY - Free Report) and Abbvie Inc (ABBV - Free Report) .
The top 10 holdings account for about 55.25% of total assets under management.
Performance and Risk
The ETF has lost about -8.10% so far this year and is down about -2.67% in the last one year (as of 10/19/2023). In the past 52-week period, it has traded between $70.78 and $81.07.
The fund has a beta of 0.65 and standard deviation of 16.32% for the trailing three-year period, which makes PJP a high risk choice in this particular space. With about 25 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco Pharmaceuticals ETF is a reasonable option for investors seeking to outperform the Health Care ETFs segment of the market. However, there are other ETFs in the space which investors could 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 $355.38 million in assets, VanEck Pharmaceutical ETF has $423.03 million. IHE has an expense ratio of 0.40% 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.