Healthcare exchange-traded funds (ETFs) invest in a basket of stocks of companies that provide medical services, develop medical equipment or drugs, offer medical insurance, or facilitate the provision of healthcare to patients. Some notable companies in the healthcare sector include UnitedHealth Group Inc. (UNH), Pfizer Inc. (PFE), and Merck & Co. Inc. (MRK). Because the majority of healthcare services and products are often seen as necessities, as opposed to discretionary purchases, the healthcare industry is considered non-cyclical. This can make healthcare ETFs a strong position in a defensive portfolio.
Key Takeaways
- The healthcare sector underperformed the broader market over the past year.
- The ETFs with the best 1-year trailing total return are CNBS, YOLO, and GERM.
- The top holdings of these ETFs are class A shares of Tilray Inc., Village Farms International Inc., and Moderna Inc., respectively.
The healthcare ETF universe is comprised of about 36 distinct ETFs that trade in the U.S., excluding inverse and leveraged ETFs, as well as funds with less than $50 million in assets under management (AUM). As of Aug. 12, 2021, the healthcare sector, as measured by the S&P 500 Health Care Sector Index, has underperformed the broader market with a total return of 26.1% over the past 12 months compared to the S&P 500’s total return of 34.0%. The best healthcare ETF, based on performance over the past year, is the Amplify Seymour Cannabis ETF (CNBS). We examine the top 3 healthcare ETFs below. All figures below are as of Aug. 13.
- Performance over 1-Year: 79.6%
- Expense Ratio: 0.75%
- Annual Dividend Yield: 0.46%
- 3-Month Average Daily Volume: 80,908
- Assets Under Management: $137.6 million
- Inception Date: July 23, 2019
- Issuer: Amplify Investments
CNBS seeks to provide investors with exposure to the global cannabis industry. At least 80% of its holdings are invested in companies that generate 50% or more of their revenue from cannabis and hemp production, and related products and services. Many of these companies produce cannabis products focused on medical needs. The actively-managed ETF invests in a basket of equities across the market-cap spectrum, from micro-cap to large-cap stocks, and includes exposure to companies focused on medical cannabis and therapeutics. About half of its assets represent the cultivation & retail or agricultural technology segments of the marijuana industry. The fund invests in both growth and value stocks. Its top three holdings include Tilray Inc. (TLRY), a Canadian pharmaceutical and cannabis company; class A shares of WM Technology Inc. (MAPS), a technology and software provider to the cannabis industry; and Canopy Growth Corp. (WEED:TSE), a producer of medical marijuana.
- Performance over 1-Year: 49.6%
- Expense Ratio: 0.75%
- Annual Dividend Yield: 0.59%
- 3-Month Average Daily Volume: 126,012
- Assets Under Management: $308.8 million
- Inception Date: April 17, 2019
- Issuer: AdvisorShares
YOLO is an actively managed fund and aims to provide long-term capital appreciation by investing in cannabis equity securities. It holds stocks of both domestic and foreign companies, but is primarily focused on those located in the U.S. and Canada. Like CNBS above, YOLO includes companies focused on therapeutics and medicinal cannabis in its portfolio. The ETF follows a blended strategy, investing in both value and growth stocks with various market capitalizations. The fund’s top three equity holdings include Village Farms International Inc. (VFF:TSE), a company that operates agricultural greenhouse facilities and raises various produce; Innovative Industrial Properties Inc. (IIPR), a company that leases properties to medical cannabis company clients; and Tilray Inc.
- Performance over 1-Year: 46.2%
- Expense Ratio: 0.68%
- Annual Dividend Yield: 0.86%
- 3-Month Average Daily Volume: 15,183
- Assets Under Management: $67.5 million
- Inception Date: June 17, 2020
- Issuer: ETFMG
GERM is a multi-cap, blended fund targeting the Prime Treatments, Testing and Advancements Index. The index includes companies that perform research or develop and commercialize treatments, vaccines, or biological testing for infectious diseases. The fund is fairly concentrated in its largest positions, with the top 10 holdings accounting for more than half of invested assets. The top holdings of GERM include Moderna Inc. (MRNA), a pharmaceutical and biotechnology company specialized in vaccine technologies based on messenger RNA; sponsored American depositary receipts (ADRs) of BioNTech SE (BNTX), a German biotechnology company that manufactures immunotherapies; and class A shares of Bio-Rad Laboratories Inc. (BIO), a maker of life science research products and analytical instrumentation.
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