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Should You Invest in the Invesco Pharmaceuticals ETF (PJP)?

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The Invesco Pharmaceuticals ETF (PJP - Free Report) was launched on 06/23/2005, and is a passively managed exchange traded fund designed to offer broad exposure to the Healthcare - Pharma segment of the equity market.

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Healthcare - Pharma is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 4, placing it in top 25%.

Index Details

The fund is sponsored by Invesco. It has amassed assets over $283.12 million, making it one of the average sized ETFs attempting to match the performance of the Healthcare - Pharma segment of the equity market. PJP seeks to match the performance of the Dynamic Pharmaceutical Intellidex Index before fees and expenses.

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.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.57%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.89%.

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.

This ETF has heaviest allocation in the Healthcare sector--about 100% of the portfolio.

Looking at individual holdings, Abbvie Inc (ABBV - Free Report) accounts for about 6.84% of total assets, followed by Regeneron Pharmaceuticals Inc (REGN - Free Report) and Eli Lilly & Co (LLY - Free Report) .

The top 10 holdings account for about 56.96% of total assets under management.

Performance and Risk

Year-to-date, the Invesco Pharmaceuticals ETF return is roughly 14.54% so far, and is up about 21.60% over the last 12 months (as of 10/10/2024). PJP has traded between $67.88 and $89.33 in this past 52-week period.

The ETF has a beta of 0.58 and standard deviation of 15.53% for the trailing three-year period, making it a high risk choice in the space. With about 24 holdings, it has more concentrated exposure than peers.

Alternatives

Invesco Pharmaceuticals ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, PJP is a sufficient option for those seeking exposure to the Health Care ETFs area of the market. Investors might also want to consider some other ETF options in the space.

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 $655.18 million in assets, VanEck Pharmaceutical ETF has $720.01 million. IHE has an expense ratio of 0.39% and PPH charges 0.36%.

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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