Should You Invest in the iShares Biotechnology ETF (IBB)?
Launched on 02/05/2001, the iShares Biotechnology ETF (IBB) is a passively managed exchange traded fund designed to provide a broad exposure to the Healthcare - Biotech 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.
Additionally, sector ETFs offer convenient 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 4, placing it in top 25%.
Index Details
The fund is sponsored by Blackrock. It has amassed assets over $7.77 billion, making it one of the largest ETFs attempting to match the performance of the Healthcare - Biotech segment of the equity market. IBB seeks to match the performance of the Nasdaq Biotechnology Index before fees and expenses.
The ICE Biotechnology Index contains securities of NASDAQ listed companies that are classified as either biotechnology or pharmaceuticals.
Costs
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for this ETF are 0.45%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.30%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Healthcare sector--about 99.90% of the portfolio.
Looking at individual holdings, Vertex Pharmaceuticals Inc (VRTX) accounts for about 8.92% of total assets, followed by Regeneron Pharmaceuticals Inc (REGN) and Amgen Inc (AMGN).
The top 10 holdings account for about 49.53% of total assets under management.
Performance and Risk
So far this year, IBB has added roughly 1.52%, and is up about 9.66% in the last one year (as of 03/28/2024). During this past 52-week period, the fund has traded between $112.41 and $140.89.
The ETF has a beta of 0.73 and standard deviation of 22.30% for the trailing three-year period, making it a high risk choice in the space. With about 230 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares Biotechnology ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, IBB is an excellent 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.
First Trust NYSE Arca Biotechnology ETF (FBT) tracks NYSE Arca Biotechnology Index and the SPDR S&P Biotech ETF (XBI) tracks S&P Biotechnology Select Industry Index. First Trust NYSE Arca Biotechnology ETF has $1.19 billion in assets, SPDR S&P Biotech ETF has $7.51 billion. FBT has an expense ratio of 0.56% and XBI charges 0.35%.
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.
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iShares Biotechnology ETF (IBB): ETF Research Reports
Regeneron Pharmaceuticals, Inc. (REGN) : Free Stock Analysis Report
Amgen Inc. (AMGN) : Free Stock Analysis Report
Vertex Pharmaceuticals Incorporated (VRTX) : Free Stock Analysis Report
SPDR S&P Biotech ETF (XBI): ETF Research Reports
First Trust NYSE Arca Biotechnology ETF (FBT): ETF Research Reports
