Should You Invest in the VanEck Vectors Pharmaceutical ETF (PPH)?

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Launched on 12/20/2011, the VanEck Vectors Pharmaceutical ETF (PPH Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Healthcare – Pharma segment of the equity market.

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.

Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. 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 Van Eck. It has amassed assets over $272.03 M, making it one of the average sized ETFs attempting to match the performance of the Healthcare – Pharma segment of the equity market. PPH seeks to match the performance of the MVIS US Listed Pharmaceutical 25 Index before fees and expenses.

The MVIS US Listed Pharmaceutical 25 Index tracks the overall performance of companies involved in pharmaceuticals, including pharmaceutical research and development as well a production, marketing and sales of pharmaceuticals.

Costs

When considering an ETF’s total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.35%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 1.62%.

Sector Exposure and Top Holdings

ETFs offer a 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.

Looking at individual holdings, Astrazeneca Plc (AZN Free Report) accounts for about 5.10% of total assets, followed by Pfizer Inc (PFE Free Report) and Bristol-Myers Squibb Co (BMY Free Report) .

The top 10 holdings account for about 49.74% of total assets under management.

Performance and Risk

Year-to-date, the VanEck Vectors Pharmaceutical ETF has added about 8.39% so far, and is up about 10.64% over the last 12 months (as of 10/09/2018). PPH has traded between $54.55 and $64.61 in this past 52-week period.

The ETF has a beta of 0.92 and standard deviation of 14.77% for the trailing three-year period, making it a medium risk choice in the space. With about 26 holdings, it has more concentrated exposure than peers.

Alternatives

VanEck Vectors Pharmaceutical 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, PPH is a good 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 Invesco Dynamic Pharmaceuticals ETF (PJP Free Report) tracks Dynamic Pharmaceutical Intellidex Index. IShares U.S. Pharmaceuticals ETF has $459.28 M in assets, Invesco Dynamic Pharmaceuticals ETF has $569.06 M. IHE has an expense ratio of 0.43% and PJP charges 0.56%.

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.