If you’re interested in broad exposure to the Healthcare – Broad segment of the equity market, look no further than the Health Care Select Sector SPDR ETF (XLV), a passively managed exchange traded fund launched on 12/16/1998.
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Healthcare – Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 6, placing it in top 38%.
The fund is sponsored by State Street Global Advisors. It has amassed assets over $39.34 billion, making it the largest ETF attempting to match the performance of the Healthcare – Broad segment of the equity market. XLV seeks to match the performance of the Health Care Select Sector Index before fees and expenses.
The Health Care Select Sector Index includes companies from the following industries: pharmaceuticals; health care providers & services; health care equipment & supplies; biotechnology; life sciences tools & services; and health care technology.
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 this ETF are 0.10%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 1.58%.
Sector Exposure and Top Holdings
It is important to delve into an ETF’s holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, 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, Unitedhealth Group Inc (UNH) accounts for about 9.28% of total assets, followed by Johnson + Johnson (JNJ) and Eli Lilly + Co (LLY).
The top 10 holdings account for about 55.12% of total assets under management.
Performance and Risk
So far this year, XLV has lost about -1.93%, and it’s up approximately 5.06% in the last one year (as of 09/18/2023). During this past 52-week period, the fund has traded between $121.11 and $140.10.
The ETF has a beta of 0.69 and standard deviation of 15% for the trailing three-year period, making it a medium risk choice in the space. With about 67 holdings, it effectively diversifies company-specific risk.
Health Care Select Sector SPDR ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, XLV is an outstanding option for investors seeking exposure to the Health Care ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
IShares Global Healthcare ETF (IXJ) tracks S&P Global 1200 Healthcare Sector Index and the Vanguard Health Care ETF (VHT) tracks MSCI US Investable Market Health Care 25/50 Index. IShares Global Healthcare ETF has $4 billion in assets, Vanguard Health Care ETF has $16.80 billion. IXJ has an expense ratio of 0.42% and VHT charges 0.10%.
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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