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Is SPDR S&P Biotech ETF (XBI) a Strong ETF Right Now?
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The SPDR S&P Biotech ETF (XBI - Free Report) made its debut on 01/31/2006, and is a smart beta exchange traded fund that provides broad exposure to the Health Care ETFs category of the market.
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.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
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.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by State Street Global Advisors. XBI has been able to amass assets over $7.19 billion, making 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 S&P Biotechnology Select Industry Index.
The S&P Biotechnology Select Industry Index represents the biotechnology sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Biotech Index is a modified equal weight index.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for XBI are 0.35%, which makes it one of the least expensive products in the space.
It's 12-month trailing dividend yield comes in at 0.02%.
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.
Representing 100% of the portfolio, the fund has heaviest allocation to the Healthcare sector.
Looking at individual holdings, Immunogen Inc (IMGN) accounts for about 2.14% of total assets, followed by Tg Therapeutics Inc (TGTX - Free Report) and Mirati Therapeutics Inc (MRTX).
Its top 10 holdings account for approximately 16.85% of XBI's total assets under management.
Performance and Risk
The ETF has added about 3.56% so far this year and was up about 11.74% in the last one year (as of 02/22/2024). In the past 52-week period, it has traded between $64.12 and $93.60.
The fund has a beta of 0.92 and standard deviation of 36.08% for the trailing three-year period, which makes XBI a high risk choice in this particular space. With about 135 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR S&P Biotech 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 iShares Biotechnology ETF (IBB - Free Report) tracks Nasdaq Biotechnology Index. First Trust NYSE Arca Biotechnology ETF has $1.19 billion in assets, iShares Biotechnology ETF has $7.48 billion. FBT has an expense ratio of 0.56% and IBB charges 0.45%.
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 Biotech ETF (XBI) a Strong ETF Right Now?
The SPDR S&P Biotech ETF (XBI - Free Report) made its debut on 01/31/2006, and is a smart beta exchange traded fund that provides broad exposure to the Health Care ETFs category of the market.
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.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
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.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by State Street Global Advisors. XBI has been able to amass assets over $7.19 billion, making 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 S&P Biotechnology Select Industry Index.
The S&P Biotechnology Select Industry Index represents the biotechnology sub-industry portion of the S&P Total Markets Index. The S&P TMI tracks all the U.S. common stocks listed on the NYSE, AMEX, NASDAQ National Market and NASDAQ Small Cap exchanges. The Biotech Index is a modified equal weight index.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for XBI are 0.35%, which makes it one of the least expensive products in the space.
It's 12-month trailing dividend yield comes in at 0.02%.
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.
Representing 100% of the portfolio, the fund has heaviest allocation to the Healthcare sector.
Looking at individual holdings, Immunogen Inc (IMGN) accounts for about 2.14% of total assets, followed by Tg Therapeutics Inc (TGTX - Free Report) and Mirati Therapeutics Inc (MRTX).
Its top 10 holdings account for approximately 16.85% of XBI's total assets under management.
Performance and Risk
The ETF has added about 3.56% so far this year and was up about 11.74% in the last one year (as of 02/22/2024). In the past 52-week period, it has traded between $64.12 and $93.60.
The fund has a beta of 0.92 and standard deviation of 36.08% for the trailing three-year period, which makes XBI a high risk choice in this particular space. With about 135 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR S&P Biotech 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 iShares Biotechnology ETF (IBB - Free Report) tracks Nasdaq Biotechnology Index. First Trust NYSE Arca Biotechnology ETF has $1.19 billion in assets, iShares Biotechnology ETF has $7.48 billion. FBT has an expense ratio of 0.56% and IBB charges 0.45%.
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.