Exchange Traded Funds (ETFs) are an excellent way to buy into an individual sector or industry without having to risk buying individual stocks. And that’s a really attractive option at this point in 2015.
The first half of 2015 is in the rear view mirror. And it wasn’t pretty. After years of solid gains, the long-in-the-tooth bull market is taking a breather. The S&P 500 rewarded patient investors with a princely 2.3% gain. And the future isn’t looking too much brighter.
In the second quarter of 2015, S&P 500 companies are expected to experience a 4.5% year-over-year decline in earnings. That would represent the first decline in earnings since the third quarter of 2012. And the biggest decline since the third quarter of 2009. (Source: factset.com, July 17, 2015.)
The U.S. is not the only economy trudging along unimpressively. China is growing at its slowest pace in 20 years; Japan is dipping in and out of recession; and Greece is helping exacerbate the economic malaise in the eurozone.
Not surprisingly, the International Monetary Fund (IMF) revised its 2015 global growth forecast lower, to just 3.3% this year. The IMF has cut its expected 2015 economic growth rate three times since July 2014. (Source: imf.org, July 17, 2015.)
The anemic growth trajectory in the U.S. could be further challenged in the second half of 2015 when it is widely expected that the Federal Reserve will start to raise interest rates, putting an end to cheap money, and dousing the fuel that has been propelling the stock market since 2009.
While the S&P 500 has been bleak, so far this year, certain sectors and industries as a whole are doing quite well. Investors looking to diversify their retirement portfolio might want to consider looking at the following ETFs in the second half of 2015.
Also Read: Top 3 Tech ETFs for 2015
Top 3 ETFs for the Second Half of 2015
ALPS Medical Breakthroughs ETF (NYSEArca/SBIO)
The ALPS Medical Breakthroughs ETF (NYSEArca/SBIO) is relatively new, with an inception date of December 31, 2014. That said; the fund has been a breakout so far in 2015, up 56% since the beginning of January at $39.50. (Source: alpsfunds.com, July 17, 2015.)
The ALPS Medical Breakthroughs ETF invests in companies operating in the biotechnology and pharmaceutical sectors with a market capitalization of no less than $200 million and no more than $5.0 billion. The fund targets companies with one or more drugs in Phase II or Phase III of FDA clinical trials. It seeks to replicate the performance of the Poliwogg Medical Breakthroughs Index, by investing in the stocks of companies as per their weightings in the index.
The fund has exposure to 73 stocks with an average market cap of $2.5 billion; 57% of the holdings are mid cap ($2.0-10.0 billion), and 57% are small cap (<$2.0 billion). The index’s top five holdings are: Akorn Inc. (4.9%), Receptos Inc. (4.9%), Seattle Genetics Inc. (4.2%), Bluebird Bio Inc. (3.7%), and Synageva Biopharma Corp. (3.4%). (Source: alpsfunds.com, July 17, 2015.)
The ALPS Medical Breakthrough ETF has total net assets of $164,366,209; average daily volume of 119,830 shares; and total operating expenses of 0.5%. As noted, it has driven returns of 56% since the beginning of the year. And, thanks to Obamacare, the aging population and hunt for new drugs should continue to reward investors.
iShares Nasdaq Biotechnology (NASDAQ/IBB)
The iShares Nasdaq Biotechnology (NASDAQ/IBB) ETF seeks to track the investment results of an index composed of biotechnology and pharmaceutical equities listed on the NASDAQ. (Source: ishares.com, July 16, 2015.)
The fund’s holdings by sector, as a percentage of market value, include Biotechnology (79.30%), Pharmaceuticals (14.68%), Life Sciences Tools & Services (5.89%), Health Care Equipment & Supplies (0.07%), and Cash and/or Derivatives (0.05%).
The top five holdings in the index include: Celgene Corp. (8.6%), Gilead Sciences Inc. (7.73%), Amgen Inc. (7.62%), Biogen Inc. (7.43%), and Regeneron Pharmaceuticals, Inc. (7.07%).
The iShares Nasdaq Biotechnology ETF’s inception date was February 5, 2001; net assets are $9,788,292,133, with an expense ratio of 0.48%; and average daily volume is 1,719,190.
Year-to-date, the fund’s share price is up 29.5% at $396.62.
iShares US Healthcare Providers (NYSEArca/IHF)
The iShares US Healthcare Providers (NYSE Arca/IHF) ETF seeks to track the investment results of an index composed of U.S. equities in the healthcare providers sector. (Source: ishares.com, July 17, 2015.)
The ETF follows the Dow Jones U.S. Select Healthcare Providers Index with exposure to companies that provide health insurance, diagnostics, and specialized treatment.
The index’s holdings by sector, as a percentage of market value, include Healthcare Providers & Services (95.89%), Healthcare Technology (1.59%), Life Sciences Tools & Services (1.31%), Commercial Services & Supplies (1.05%), Cash and/or Derivatives (0.16%).
Top five holdings, all found in the healthcare sector, are: UnitedHealth Group Inc. (12.3%), Express Scripts Holding Co (8.4%), Cigna Corp. (6.2%), Anthem Inc. (6.12%), and Aetna Inc. (5.9%).
With an inception date of May 1, 2006, the iShares US Healthcare Providers has net assets of $1,082,697,114; an expense ratio of 0.45%; and average daily volume of 123,187.
The index is up 18.85% year-to-date at $142.18. With Obamacare being the law of the land, more Americans are joining the healthcare system, which can only help ETFs like the iShares US Healthcare Providers.