Top Biotech ETFs to Buy The Motley Fool

The continued legalization of marijuana means growth for companies in this sector. The SPDR S&P Biotech ETF has chalked up a gain of 40% with only a couple of weeks left in the year — twice the return of the S&P 500 index. The final stock on today’s list is Acadia Pharmaceuticals (ACAD -3.65%). This company recently converted into a commercial-stage business with the launch of Nuplazid, the first and only FDA-approved treatment for Parkinson’s disease psychosis, which affects roughly 400,000 patients in the U.S. Check out NerdWallet’s list of the best online brokers for ETF investing.

Since then, it has generated an average annual return of more than 5%. Over the past five years, the ETF’s annualized return is close to 4%. They have large amounts of assets under management and relatively low expense ratios. The award for best-performing biotech stock of all in 2017 goes to Marinus Pharmaceuticals. Marinus’ market cap was below $20 million at the beginning of the year. One bright side to all of that selling is that a handful of high-quality biotech stocks are currently trading for attractive prices.

The First Trust NYSE Arca Biotechnology ETF entered the market on June 23, 2006, and aims to track the NYSE Arca Biotechnology Index as closely as it can. Companies in this fund are generally involved in areas such as recombinant DNA technology, molecular biology, genetic engineering and genomics. Investing in the biotech industry can be a long road to gains given the sector’s volatility. For example, since 2020 only 42 new biologics licenses have been approved by the FDA compared to 102 chemical compounds. The distinction of biotech is that this group focuses more on addressing complex diseases, like cancer, with treatments developed from living organisms like bacteria or mammalian cells. This is in contrast to traditional pharmaceuticals which are typically synthesized through chemicals.

Sales grew by 18% thanks to strong numbers from drugs such as Revlimid, Pomalyst/Imnovid, and Otezla. Earnings grew by an even stronger 21% thanks to the company’s healthy appetite for buying back stock and its unparalleled ability to raise margins. The three top ETFs in this group have fallen less than the 16% drop in the Nasdaq Biotechnology Index and also less than the 19% decline in the S&P 500 Index in the last year as of Nov. 9. Analyze the ETFs outlined in this article or run your own ETF screen through your online broker, and take a look through their holdings, which are clearly identified on a fund’s web page.

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That’s because individual biotech stocks can be incredibly volatile. Small, trial-stage firms sometimes burn cash for years on the hopes of their research paying off. When it does, these biotechnology start-ups soar – but when it doesn’t, they tend to drop like rocks. The opportunities are particularly large for biotechnology stocks addressing big medical challenges such as cancer or Alzheimer’s or rare conditions without any existing treatments available.

In the last three years since 2020, BBH has returned 7%, compared to 0.4% by IBB, and a -24% loss in value from XBI. We’re not suggesting BBH will always outperform over every specific timeframe going forward, but its record speaks for itself. Going through the current portfolio, we see a concentration among the industry leaders including Amgen Inc (AMGN), Gilead Sciences Inc (GILD), and Vertex Pharmaceuticals Inc (VRTX) among the top holdings. You should invest when you’re willing to accept that and can hold your investment for the long term.

That massive run has naturally caused the value of NTLA stock to represent a larger share of the portfolio than other stocks that haven’t fared as well. But even so, Intellia accounts for just over 1% of the total assets at present – proving that XBI is serious about diversification. It’s more diversified than some of the other picks on this list of biotech funds in that it has about 200 total holdings, but regularly rebalances to try and spread the cash equally around each position. Some investors may appreciate this extra layer of diversification, but as with other funds on this list, it is important to clearly understand the way this biotech fund is structured before you invest your hard-earned cash. Here are nine of the best biotech ETFs to play this high-octane healthcare trend. Each provides a unique way to approach this corner of the market.

• Investing in the biotech industry can be a long road to gains given the sector’s volatility.
• Broad biotech ETFs provide diversification that investing in individual biotech stocks does not afford.
• And on Dec. 7, the biotech reported that it had licensed XOMA 358, an experimental drug targeting treatment of hypoglycemia, to small drugmaker Rezolute.
• However, over the short term, biotechnology hasn’t performed as well.
• If you want to skip our discussion on the pharma industry, you can go directly to the 5 Best Pharma ETFs.

Biotech stocks can be risky investments, especially if years of research and testing ends up for not. So if you are looking for a safer way to invest in a sector that has historically provided significant gains and helped to improve health and save lives, then a biotech ETF is worthy of your consideration. Biotechnology is an exciting and growing field, but investors interested in the industry need to consider the risks and volatility involved. Buying shares in a biotech ETF is an easy way to build a diversified portfolio, which reduces the risk of failed clinical trials. The SPDR S&P Biotech ETF (XBI) is an index fund that aims to track the S&P Biotechnology Select Industry Index.

It gives investors exposure to large-cap, mid-cap, and small-cap biotech stocks. The fund invests in primarily growth stocks of various market capitalizations. Broad biotech ETFs provide diversification that investing in individual biotech stocks does not afford. If one biotech company falls short, there is the potential that the other biotech stocks within the ETF portfolio will serve to limit the downside impact. In terms of risks, biotech remains exposed to macro themes with the possibility of a global slowdown representing a risk to watch. Renewed financial market volatility or weaker investing sentiment would open the door for further downside in biotech stocks including BBH.

These ETFs track an index of biotech companies or its inverse and apply a multiple in performance (2x, 3x, -2x. -3x). Loncar Cancer Immunotherapy ETF (CNCR) for example provide exposure to biotech companies dedicated to finding a cure for cancer thru immunotherapy (artificial stimulation of the immune system to treat cancer). Finding it difficult to decide on a specific biotech sub-sector?

Over the past five years, the ETF’s average annual return was close to 5.5%. The SPDR S&P Biotech ETF has delivered a total annualized return of about 10% since its inception in 2006. Over the https://bigbostrade.com/ past five years, however, the ETF generated an average annual return of negative 0.3%. ETFs are similar to mutual funds in that they can own lots of stocks (and sometimes other assets).

Principal Healthcare Innovators Index ETF

Healthcare is one of the market’s most dynamic and resilient sectors. After all, one of the surest things in life is getting sick and needing care as we age – and that means guaranteed “customers” in any environment. Keith Speights owns shares of Celgene, Gilead Sciences, and SPDR S&P Biotech. The Motley Fool owns shares of and recommends Alnylam Pharmaceuticals, Celgene, and Gilead Sciences.

Once you’re set with a brokerage account, determine if there are specific companies you’d like to invest in, whether that’s smaller, high-growth biotechs or larger, more established health care and pharmaceutical companies. This research will help you decide what your risk tolerance is and will point you in the right direction when you start looking at different ETFs. Looking at an ETF’s holdings and their corresponding weights can help you determine if it’s the right bolsas asiaticas fund for you. So when might investors seek out biotech ETFs, as opposed to broader ETFs or funds that track other sectors? Global health scares like the coronavirus pandemic may bring to the fore biotech companies’ research, clinical trials, treatments and cures. Taking a different approach, the Invesco Dynamic Biotechnology & Genome ETF (PBE, $76.69) invests in a short list of roughly 30 companies, but picks and chooses biotech stocks based on qualitative criteria.

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By effectively screening out smaller and more speculative biotech stocks, BBH delivers a layer of quality to the fund. The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Investing involves risk including the possible loss of principal.

Since inception, the iShares Nasdaq Biotechnology ETF has achieved an average annual return of 7.66%. Over the past five years, the ETF has generated an average annual return of 18.71%. Some of the biggest names in the investing world offer biotech ETFs in the field of genomics.

Our estimates are based on past market performance, and past performance is not a guarantee of future performance. Jeff Reeves writes about equity markets and exchange-traded funds for Kiplinger. A veteran journalist with extensive capital markets experience, Jeff has written about Wall Street and investing since 2008.

Established on February 6, 2006, the SPDR S&P Biotech ETF is a largely balanced fund in terms of weight that focuses mostly on biotech companies with some pharmaceutical companies. As noted by ETF.com, it focuses on small- and micro-cap companies, which makes the weight of each holding smaller than the holdings of other ETFs in this sector. An ETF is a relatively safe investment route that can minimize losses while offering exposure to multiple companies instead of focusing on the gains and losses of a single biotech stock. With that in mind, here’s a brief look at the five top biotechnology ETFs by total assets. Data was sourced from ETFdb.com on May 31, 2023, and all data was current as of that time. We bring this up to highlight the challenge for emerging entrants attempting to climb their way through the entire approval process.

Under the terms of this deal, XOMA received $31 million in upfront payments (including a $5 million equity investment) plus potential milestone payments and tiered royalties on future sales of gevokizumab. There was plenty of other good news for Sangamo this year as well. The biotech received orphan-drug and fast-track designations for several of its pipeline candidates. The first patients received treatment in a couple of phase 1/2 clinical studies evaluating gene therapies SB225 and SB913. Probably the only factor holding Sangamo stock back somewhat was the company’s public stock offering, which generated gross proceeds of $83.4 million. We have shortlisted the 12 best pharma ETFs based on their historical five-year performance as of September 11.

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In general, companies with larger market caps often tend to be less volatile than those with smaller market caps. Biotech ETFs provide a lower-risk way to play this broader trend. Interested investors don’t have to personally research how individual stocks are performing or look up rather arcane studies on unpronounceable diseases.

The results were encouraging enough for management to reaffirm its 2020 goals of $21 billion in revenue and EPS of at least $13. Those figures represent compound annual growth of 17% and 22%. With shares trading around 16 times forward earnings, Celgene offers investors a lower-risk way to buy into the crazy world of biotech. The past 18 months haven’t been very pleasant for biotech investors. The SPDR S&P Biotech ETF (XBI 0.38%) has fallen nearly 30% from its all-time highs set back in the summer of 2015.

The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy. Want to invest in smaller companies with a higher potential return in exchange for higher risk? Want to stick with the pharmaceutical giants with historically less volatility? These may include some of the world’s most established and largest companies (think Johnson & Johnson or AstraZeneca) as well as smaller, less-experienced firms. But regardless of size, each will be assigned a specific “weight” in the ETF that determines how much the fund invests in a particular holding.

Biotechnology, a field that studies the basic building blocks of biology and living organisms along with techniques to leverage biology for everything from health care to manufacturing, is a massively growing industry. David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now… That’s right — they think these 10 stocks are even better buys.

However, BBH is largely focused on mature biotech companies that offer up many different types of treatments. What this iShares fund offers is right in the name – a more direct play on the unique category of drugs and technologies that serve genomics and immunotherapy applications. The iShares Genomics Immunology and Healthcare ETF (IDNA, $49.66) follows a similar approach to BBH insofar as it’s not as interested in casting a wide net on a few hundred biotech stocks. The list right now is about 50 total components in this roughly $320 million biotech fund. But it’s worth noting that these are hardly start-ups anymore, with the “smallest” of the three (Gilead) boasting a market capitalization of $85 billion – larger than companies like General Motors (GM) or Ford (F). Furthermore, these mature companies represent the lion’s share of the fund with that aforementioned trio worth about 20% of the total assets alone.

Among the iShares Biotechnology ETF’s top holdings are some of the biggest biotech stocks based on market capitalization rank. They include Amgen (AMGN -0.54%), Gilead Sciences (GILD -0.31%), Moderna (MRNA -0.53%), and Regeneron Pharmaceuticals (REGN -0.09%). With their relatively large market caps, it will probably be more difficult for Alnylam and Nektar to achieve similar gains in 2018. However, don’t be surprised if all of these biotech stocks — the three winners and the two honorable mentions — perform well next year. XOMA Corporation claimed the second-highest performance in 2017 among biotech stocks, with its share price soaring close to 700%.

VanEck Vectors Biotech ETF

When added together, these positives make Regeneron’s forward P/E of 26 look quite reasonable. With just under $200 million in assets, the Principal Healthcare Innovators Index ETF (BTEC, $58.67) is significantly smaller than other biotech ETFs on this list. However, it is the leader in total holdings with more than 300 total positions at present and thus could be worth a look because of this. Currently, the fund has about 130 total positions, topping many of the other biotech ETFs featured here when it comes to breadth. Furthermore, its top three holdings at the moment – Vir Biotechnology (VIR), Legend Biotech (LEGN) and TG Therapeutics (TGTX) – collectively tally only about $16 billion or so in market value. These biotech ETFs provide a lower-risk way to invest in the space.

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