Should You Invest In The PowerShares Dynamic Biotechnology & Genome Portfolio (PBE)?
Zacks Investment Research | May 16, 2018 11:05PM ET
Looking for broad exposure to the Healthcare - Biotech segment of the U.S. equity market? You should consider the PowerShares Dynamic Biotechnology & Genome Portfolio (PBE), a passively managed exchange traded fund launched on 06/23/2005.
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 - Biotech is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 11, placing it in bottom 31%.
Index Details
The fund is sponsored by Invesco Powershares. It has amassed assets over $248.76 M, making it one of the average sized ETFs attempting to match the performance of the Healthcare - Biotech segment of the U.S. equity market. PBE seeks to match the performance of the Dynamic Biotechnology & Genome Intellidex Index before fees and expenses.
This is comprised of stocks of 30 U.S. biotechnology and genome companies. These are companies that are principally engaged in the research, development, manufacture and marketing and distribution of various biotechnological products, services and processes and companies that benefit significantly from scientific and technological advances in biotechnology and genetic engineering and research.
Costs
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.58%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.42%.
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, Illumina Inc (NASDAQ:ILMN) accounts for about 5.68% of total assets, followed by Qiagen Nv (QGEN) and Biogen Inc (NASDAQ:BIIB).
The top 10 holdings account for about 46.80% of total assets under management.
Performance and Risk
So far this year, PBE has gained about 8.76%, and it's up approximately 18.19% in the last one year (as of 05/17/2018). During this past 52-week period, the fund has traded between $41.77 and $54.07.
Get The News You Want
The ETF has a beta of 1.38 and standard deviation of 27.96% for the trailing three-year period, making it a high risk choice in the space. With about 31 holdings, it has more concentrated exposure than peers.
Alternatives
PowerShares Dynamic Biotechnology & Genome Portfolio holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, PBE 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.
SPDR S&P Biotech ETF (MX:XBI) tracks S&P Biotechnology Select Industry Index and the iShares Nasdaq Biotechnology ETF (IBB) tracks Nasdaq Biotechnology Index. SPDR S&P Biotech ETF has $5.23 B in assets, iShares Nasdaq Biotechnology ETF has $8.86 B. XBI has an expense ratio of 0.35% and IBB charges 0.47%.
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 Investment Research
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