The four horsemen of the biotechnology - Amgen (NASDAQ:
), Biogen Idec (NASDAQ:
), Celgene (NASDAQ:
) and Gilead Sciences (NASDAQ:
) - all hit new 52-week highs earlier Thursday.
Predictably, this biotech breakout has been good news indeed
for the four horsemen of biotech
In further evidence that an equity-based ETF's underlying
holdings are the tail that wags the dog, or the ETF in this case,
the iShares Nasdaq Biotechnology Index Fund (NASDAQ:
) is up nearly 1.2 percent today on volume that is well above the
IBB, with $2.53 billion in assets under management, is the
largest and most heavily traded biotech ETF. Gilead, Amgen,
Celgene and Biogen, in that order, represent four of IBB's
top-six holdings and combine for over 29 percent of the ETF's
weight. That helps explain IBB's ascent to a fresh all-time high
However, small ETFs with lighter weights to biotech's Big Four
are getting in on the act as well. The First Trust NYSE Arca
Biotechnology Index Fund (NYSE:
) also joined the biotech ETF all-time high club earlier today.
That ETF is up about one percent. FBT, which has $283.4 million
in AUM, allocates approximately 22 percent of its weight to the
aforementioned quartet of biotech giants. Biogen, Amgen and
Gilead represent FBT's largest, third- and fourth-largest
FBT is more volatile than IBB. The former has a three-year
standard deviation of 26 percent and a beta of 1.19 compared to
17.1 percent and a beta of 0.91 for IBB's underlying index,
according to First Trust data
. Over the past six months, however, FBT has rewarded investors
that have embraced that added volatility by returning 15.7
percent compared to 10.7 percent for IBB.
The SPDR S&P Biotechnology ETF (NYSE:
) missed out on a new all-time high by mere pennies earlier
today, but the $741 million ETF is still up 1.1 percent. XBI's
performance is made all the more impressive by the fact that this
is not market cap-weighted ETF. Rather, XBI uses an almost
equal-weight approach to build its 53-stock lineup.
That means Amgen, Biogen, Celgene and Gilead do not even
combine for 10 percent of XBI's weight. Long-term investors have
not missed out on much though because with the benefit of
Thursday's gain, XBI has now doubled since its 2006 debut.
Regarding volatility, XBI is more comparable to FBT with
annualized volatility of 21.73 percent and a beta against the
S&P 500 of 1.16,
according to State Street data
In the "don't you forget about me" realm of biotech ETFs, the
Market Vectors Biotech ETF (NYSE:
) leads a
somewhat anonymous existence relative to its
, but that should not be the case. On better than double the
average daily turnover, BBH is up 1.4 percent today and touched a
new 52-week high as well.
For investors that want ample exposure to biotech's Big Four,
BBH is the play. The $210.1 million ETF allocates over 41 percent
of its weight to those four names and the quartet represents
BBH's four largest holdings. Combined, Amgen and Gilead are 25.5
percent of BBH's total lineup. BBH and XBI are the cheapest of
the four major biotech ETFs with annual fees of 0.35 percent. FBT
charges 0.6 percent while IBB charges 0.48 percent.
For more on ETFs, click
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