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Is SPDR S&P Biotech ETF (XBI) a Strong ETF Right Now?
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A smart beta exchange traded fund, the SPDR S&P Biotech ETF (XBI - Free Report) debuted on 01/31/2006, and offers 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 offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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
Because the fund has amassed over $7.92 billion, this makes it one of the largest ETFs in the Health Care ETFs. XBI is managed by State Street Global Advisors. Before fees and expenses, XBI 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
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
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 0.13%.
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.
For XBI, it has heaviest allocation in the Healthcare sector --about 100% of the portfolio.
When you look at individual holdings, Exact Sciences Corp (EXAS - Free Report) accounts for about 3.60% of the fund's total assets, followed by Alnylam Pharmaceuticals Inc (ALNY - Free Report) and United Therapeutics Corp (UTHR - Free Report) .
XBI's top 10 holdings account for about 29.66% of its total assets under management.
Performance and Risk
So far this year, XBI return is roughly 12.73%, and was up about 27.54% in the last one year (as of 08/29/2024). During this past 52-week period, the fund has traded between $64.12 and $102.89.
The fund has a beta of 0.95 and standard deviation of 34.86% for the trailing three-year period, which makes XBI a high risk choice in this particular space. With about 142 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR S&P Biotech 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.
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 $7.80 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?
A smart beta exchange traded fund, the SPDR S&P Biotech ETF (XBI - Free Report) debuted on 01/31/2006, and offers 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 offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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
Because the fund has amassed over $7.92 billion, this makes it one of the largest ETFs in the Health Care ETFs. XBI is managed by State Street Global Advisors. Before fees and expenses, XBI 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
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
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 0.13%.
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.
For XBI, it has heaviest allocation in the Healthcare sector --about 100% of the portfolio.
When you look at individual holdings, Exact Sciences Corp (EXAS - Free Report) accounts for about 3.60% of the fund's total assets, followed by Alnylam Pharmaceuticals Inc (ALNY - Free Report) and United Therapeutics Corp (UTHR - Free Report) .
XBI's top 10 holdings account for about 29.66% of its total assets under management.
Performance and Risk
So far this year, XBI return is roughly 12.73%, and was up about 27.54% in the last one year (as of 08/29/2024). During this past 52-week period, the fund has traded between $64.12 and $102.89.
The fund has a beta of 0.95 and standard deviation of 34.86% for the trailing three-year period, which makes XBI a high risk choice in this particular space. With about 142 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR S&P Biotech 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.
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 $7.80 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.