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Is iShares Biotechnology ETF (IBB) a Strong ETF Right Now?
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Designed to provide broad exposure to the Health Care ETFs category of the market, the iShares Biotechnology ETF (IBB - Free Report) is a smart beta exchange traded fund launched on 02/05/2001.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
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.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
IBB is managed by Blackrock, and this fund has amassed over $6.53 billion, which makes it one of the largest ETFs in the Health Care ETFs. Before fees and expenses, this particular fund seeks to match the performance of the Nasdaq Biotechnology Index.
The ICE Biotechnology Index contains securities of NASDAQ listed companies that are classified as either biotechnology or pharmaceuticals.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.45% for IBB, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.27%.
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 99.80% of the portfolio.
Looking at individual holdings, Amgen Inc (AMGN - Free Report) accounts for about 9.01% of total assets, followed by Vertex Pharmaceuticals Inc (VRTX - Free Report) and Regeneron Pharmaceuticals Inc (REGN - Free Report) .
The top 10 holdings account for about 54.73% of total assets under management.
Performance and Risk
So far this year, IBB has lost about -7.72%, and is down about -11.19% in the last one year (as of 12/01/2023). During this past 52-week period, the fund has traded between $112.41 and $138.43.
IBB has a beta of 0.78 and standard deviation of 22.94% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 268 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares Biotechnology ETF is an excellent option for investors seeking to outperform the Health Care ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
First Trust NYSE Arca Biotechnology ETF (FBT - Free Report) tracks NYSE Arca Biotechnology Index and the SPDR S&P Biotech ETF (XBI - Free Report) tracks S&P Biotechnology Select Industry Index. First Trust NYSE Arca Biotechnology ETF has $1.17 billion in assets, SPDR S&P Biotech ETF has $6.28 billion. FBT has an expense ratio of 0.56% and XBI charges 0.35%.
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 iShares Biotechnology ETF (IBB) a Strong ETF Right Now?
Designed to provide broad exposure to the Health Care ETFs category of the market, the iShares Biotechnology ETF (IBB - Free Report) is a smart beta exchange traded fund launched on 02/05/2001.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
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.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
IBB is managed by Blackrock, and this fund has amassed over $6.53 billion, which makes it one of the largest ETFs in the Health Care ETFs. Before fees and expenses, this particular fund seeks to match the performance of the Nasdaq Biotechnology Index.
The ICE Biotechnology Index contains securities of NASDAQ listed companies that are classified as either biotechnology or pharmaceuticals.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.45% for IBB, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.27%.
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 99.80% of the portfolio.
Looking at individual holdings, Amgen Inc (AMGN - Free Report) accounts for about 9.01% of total assets, followed by Vertex Pharmaceuticals Inc (VRTX - Free Report) and Regeneron Pharmaceuticals Inc (REGN - Free Report) .
The top 10 holdings account for about 54.73% of total assets under management.
Performance and Risk
So far this year, IBB has lost about -7.72%, and is down about -11.19% in the last one year (as of 12/01/2023). During this past 52-week period, the fund has traded between $112.41 and $138.43.
IBB has a beta of 0.78 and standard deviation of 22.94% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 268 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares Biotechnology ETF is an excellent option for investors seeking to outperform the Health Care ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
First Trust NYSE Arca Biotechnology ETF (FBT - Free Report) tracks NYSE Arca Biotechnology Index and the SPDR S&P Biotech ETF (XBI - Free Report) tracks S&P Biotechnology Select Industry Index. First Trust NYSE Arca Biotechnology ETF has $1.17 billion in assets, SPDR S&P Biotech ETF has $6.28 billion. FBT has an expense ratio of 0.56% and XBI charges 0.35%.
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.