Over the past couple of days there has been news of several
multi-billion dollar deals in the pharmaceutical sector.
The big news came on Monday night when it began to leak that
Valeant Pharmaceuticals (NYSE:
) was going to make a bid for Allergan (NYSE:
), the maker of
The deal could be worth as much as $47 billion in cash and
stock. The share price of both stocks soared on the news.
This weekend there was a rumor that Pfizer (NYSE:
) could make a bid for AstraZeneca (NYSE:
) that would make it one of the largest deals in the sector,
upwards of $100 billion.
And then there was Novartis (NYSE:
) buying the oncology unit at GlaxoSmithKline (NYSE:
) for over $15 billion.
Comparing Beyond BRIC ETFs
The flurry of
has helped the sector rebound from a nasty sell-off that was led
stocks over the last month. The moves over the last few days show
the strength of the sector and the cash that is available for
even more mergers in the future.
When there is M&A activity in a sector it typically
creates excitement and it attracts new money. This trend will
help all pharma-related ETFs. The iShares U.S. Pharmaceutical ETF
)has exposure to Pfizer and Allergen, with both stocks in the top
six holdings. In the last 12 months the ETF is up 26.5 percent
and it charges an expense ratio of 0.45 percent.
The SPDR S&P Pharmaceuticals ETF (NYSE:
) also has AGN and PFE in its top holdings at number two and
number nine, respectively. The ETF is up 42 percent in the last
year and it charges an expense ratio of 0.35 percent.
The Market Vectors Pharmaceutical ETF (NYSE:
) is different than the first two listed because it invests in
companies outside of the U.S.
Therefore, the ETF can hold more of the stocks mentioned in
the merger activity. Similar to the first two ETFs, Allergen and
Pfizer are in the top six holdings, but it also owns
, , and Valeant.
All six stocks mentioned above are found in the ETF's
portfolio. The expense ratio is 0.35 percent and over the last 12
months it was up 25.4 percent.
Expect the ETFs to be on the move this week and possibly
retest the highs set earlier this year.
© 2014 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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