Top 7 Biotech ETFs in 2022

Introduction

 

Life before the COVID-19 pandemic was a lot different than it is today. As the world grappled with the coronavirus and sought viable remedies, 2020 was the year for growth-oriented healthcare brands. 

 

How can you spot great potential if you are seeking a means to invest in these businesses? Investing in individual companies is always risky, but given the complexity of the biotech product development process, biotech stocks might appear especially daunting to investors. However, there is a third option: biotech ETFs.

 

Biotech ETFs offer a well-diversified portfolio for investors looking to invest in healthcare brands. This blog sheds light on some of the top Biotech ETFs and their workings in detail. 

 

What are Biotech ETFs and how do they work?

 

An exchange-traded fund (ETF) is a collection of assets that you may purchase or sell on a stock market through a brokerage business. Biotech exchange-traded funds or Biotech ETFs allow you to make a single investment in a group of healthcare firms. These ETFs, similar to individual stocks, can be purchased and sold at any time during the day. 

 

However, there is a significant difference between them and stock shares. That is, purchasing shares of an ETF spread your risk across a wide variety of firms, allowing the underperformers' losses to be compensated by the outperformers' profits. When you purchase single stocks, you're betting everything on the performance of a single firm.

 

Furthermore, because these funds track indexes, which means they invest in all of the stocks in a designated sector of the financial markets, you won't have to spend a higher charge (known as an ETF's "cost ratio") for management to pick and choose assets for you.

 

Read | An Introduction to Financial Analysis

 

Top 7 Biotech ETFs

 

Do you want to put your money into a smaller company with a bigger potential return in exchange for a higher amount of risk? There's an exchange-traded fund for that. Or do you want to remain with the pharmaceutical behemoths that have had less turbulence in the past? There are a lot of those as well.  

 

Let us look at the top 7 Biotech ETFs ruling the healthcare industry nowadays (time I am writing this blog).

 

1. VanEck Biotech ETF (BBH)

 

The MVIS US Listed Biotech 25 Index, which BBH monitors, is an index of firms that develop, manufacture, sell, and promote therapeutics based on genetic analysis and diagnostic equipment. The fund's top ten holdings account for more than 59 percent of all invested assets, indicating that it is extremely concentrated on a few names. 

 

The VanEck Biotech ETF has holdings in some potentially big names. Some of them include: 

 

1. Moderna Inc. (MRNA), which is a pharmaceutical and biotechnology company focused on messenger ribonucleic acid (mRNA)-based vaccine technologies.

2. Amgen Inc. (AMGN), a biopharmaceutical company that is focused on treating serious illnesses and hard-to-cure diseases

3. Gilead Sciences Inc. (GILD), is a biopharmaceutical company that researches, develops, and commercializes innovative medicines. 

 

2. iShares Genomics Immunology and Healthcare ETF (IDNA)

 

IDNA is a multi-cap blended fund that tracks the NYSE FactSet Global Genetics and Immuno Biopharma Index, which includes firms with long-term growth and innovation in immunology, genomics, and bioengineering. The fund invests in both established and growing market firms, with the vast bulk of its assets based in the United States or Germany. 

 

Let’s look into the smaller, more specialized options in biotech ETFs. A good example of this is the iShares IDNA ETF, which is a targeted biotech ETF with just 50 total components with an emphasis on "innovation in genomics, immunology, and bioengineering." Currently, it includes companies like Sanofi (SNY), a European mega-cap pharmaceutical, and Exelixis Inc, a $5 billion cancer biotech (EXEL).

 

(Also read: ETF Dividends: Types, Working, and Examples)

 

3. Invesco Dynamic BioTech & Genome ETF (PBE)

 

PBE is a PowerShares dynamic portfolio that invests in the biotech sector of the healthcare business in the United States. The plan follows the Dynamic Biotech & Genome Intellidex Index, which is made up of shares from 30 biotech and genome businesses in the United States. PBE and the index it measures are rebalanced and reconstructed every four months - in February, May, August, and November. 

 

The Invesco Dynamic Biotech ETF, which has a market capitalization of around $200 million, is also another smart bet on a subcategory of companies in the industry, this time featuring gene-editing and DNA-related skills. This includes huge biotech firms like Regeneron Pharmaceuticals Inc. (REGN), a $60 billion company, as well as smaller up-and-comers like Alkermes PLC, a Dublin-based "orphan medicine" researcher (ALKS). 

 

 

4. First Trust NYSE Arca Biotechnology ETF (FBT)

 

This roughly $2 billion First Trust fund, which only has 30 total assets, is another fund focusing on a small number of high-octane biotechs. However, no single ownership exceeds 5%, thus the money is fairly evenly distributed across this list. 

 

First Trust NYSE Arca Biotechnology has some major holdings. Some of them include: 

 

1. Acadia Pharmaceuticals Inc. (ACAD) which is a $3 billion neurological treatment specialist

2. FibroGen Inc. (FGEN), which is a $1 billion biotech focused on several rare organ ailments, is now among the top holdings. 

 

FBT has been quite volatile recently, but its 17 percent drop in the last year is significantly better than some of its competitor biotech ETFs on this list. This demonstrates how a targeted list of high-quality components may help this First Trust product prosper even in a challenging market.

 

5. iShares Biotechnology ETF (IBB)

 

IBB is the largest biotech ETF in terms of assets, with approximately $10 billion under management. It is one of the most well-known methods to gain exposure to the high-growth sector of health care. It also has a daily average of more than 2 million shares traded, making it an attractive and efficient asset in what can be a turbulent industry.

 

Amgen Inc. (AMGN) and Gilead Sciences Inc. (GILD) are among the top holdings among its around 370 investments at the moment (GILD). One thing buyers should be aware of is that these aren't exactly upstarts, as the duo is worth almost $200 billion in market value and accounts for nearly 18% of the whole IBB business.

 

Must Read: Understanding Inverse ETFs

 

6. SPDR S&P Biotech ETF (XBI)

 

The SPDR fund is now the second-largest biotech fund, with around $6 billion in assets. Although it has a similar concentration on gene-editing businesses, growth-stage drugmakers, and excellent diagnostic companies as IBB, it is built differently. It offers a limited list of equities, with just roughly 200 components in the portfolio. 

 

Furthermore, SPDR S&P Biotech ETF (XBI) aspires to have "equal merit," with frequent rebalancing to guarantee that no single stock has an excessively large or small position. This implies lesser-known biotech companies like Arena Pharmaceuticals Inc. (ARNA), a $5 billion gastrointestinal specialist, and PTC Therapeutics Inc. (PTCT), a $3 billion oncology business, will trade alongside the top players to give genuine visibility to the whole industry.

 

7. ARK Genomic Revolution ETF (ARKG)

 

ARKG, a $5 billion actively managed ETF, differs from the previous two funds in that it is meant to have 50 or fewer assets based on a unique set of internal parameters. In principle, this puts money behind the best possibilities – at least, according to the screening approach used by the biotech ETF's management, led by Cathie Wood, a well-known investor. 

 

With a 7% scaling factor, DNA screening test expert Exact Sciences Corp. (EXAS) now holds the top single position, followed by remote health care play Teladoc Health Inc. (TDOC).

 

Some of ARK Genomic Revolution ETF’s top holdings are:

 

1. Exact Sciences Corporation 8.54%

2. Teladoc Health, Inc. 7.71%

3. Ionis Pharmaceuticals, Inc. 5.63%

4. Fate Therapeutics, Inc. 4.56%

5. Vertex Pharmaceuticals Incorporated 4.56%

6. Intellia Therapeutics, Inc. 4.14%

7. Beam Therapeutics, Inc. 3.90%

8. CareDx, Inc. 3.65%

 

Conclusion

 

The world's top biotech and drug manufacturing corporations are always rushing to develop new vaccines, remedies, and breakthroughs, but the burden isn't completely on businesses like Johnson & Johnson and Pfizer. Hundreds of smaller businesses, many with highly specialized skills, are also at the cutting edge of sophisticated research.

 

For more information on Biotech ETFs, watch this:

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Biotech firms’ research, clinical research, therapies, and remedies may be brought to the forefront by world health concerns like the coronavirus pandemic. Hope this blog has helped you learn quite a lot about some of the top Biotech ETFs. The bottom line is that, as both individual and institutional investors scramble to acquire shares of firms that may gain from specific product developments, the industry as a whole might experience a rise in stock prices.