Much has been made of low volatility sectors leading U.S.
equities to new all-time highs. Sectors such as
consumer staples and utilities are driving the
broader market higher
Health care is certainly in the conversation as well, and it
is not just
biotech names that are leading this sector's
. Conservative investors have been rewarded as well.
For example, blue-chip pharmaceuticals names
Johnson & Johnson (NYSE:
), Pfizer (NYSE:
) and Eli Lilly (NYSE:
) all touched new 52-week highs on Thursday.
Investors have some compelling options when it comes to
exposure to a broad swath of pharmaceuticals stocks via
, but the leaders in this group this year have been the Market
Vectors Pharmaceuticals ETF (NYSE:
) and the PowerShares Dynamic Pharmaceuticals Portfolio (NYSE:
). The names of these ETFs imply obvious similarities, but a
closer examination reveals a match-up worthy of an ETF
At the superficial level, PJP is the larger of the two funds
with nearly twice the assets under management ($457.3 million) as
PPH has ($229.7 million). PPH, however, is the cheaper of the two
with an expense ratio of 0.35 percent compared to 0.63 percent of
PJP. PJP also has average daily volume that is more than double
that of PPH's (over 100,000 shares compared to 45,300 shares for
More importantly, there are significant differences regarding
how these ETFs go about their daily business. With PPH, investors
are getting more a pure-play on blue-chip pharmaceuticals stocks.
PPH is home to 26 stocks, nearly of all of which can be
considered large-cap value names. Johnson & Johnson, Pfizer
and Novartis (NYSE:
) combine for nearly a third of the ETF's weight.
Throw in Merck (NYSE:
) and Sanofi (NYSE:
) and five stocks represent nearly 47 percent of PPH's
Although PJP is not much in terms of total holdings at 30, the
ETF is spread more evenly. Yes, PJP is home to usual
pharmaceuticals suspects. Bristol-Myers Squibb (NYSE:
), Pfizer, Merck and Johnson & Johnson are all found among
the ETF's top-10 holdings. However, that quartet represents just
over 20 percent of PJP's weight.
Additionally, PJP offers noteworthy biotech exposure. In fact,
the ETF's two largest holdings are Amgen (NASDAQ:
) and Gilead Sciences (NASDAQ:
). Nearly a third of PJP's holdings can be classified as biotech
stocks rather than traditional pharma names.
The ETF's other biotech holdings include Biogen (NASDAQ:
), Celgene (NASDAQ:
) and Vivus (NASDAQ:
With biotech stocks
and ETFs surging higher this year
, it is likely PJP's exposure to that sector that has helped it
slightly outpace PPH year-to-date. On that basis, PJP is higher
by 16.2 percent compared to 15.8 percent for PPH as of April
Of course, the tradeoff with the higher weight to biotech
found in PJP is that the ETF's volatility has been higher than
PPH's this year,
according to ETF Replay data
In terms of valuation, PJP compares favorably with PPH. The
former has a P/E ratio of 15.48 and a price-to-book ratio of
according to PowerShares data
. PPH has a P/E of 19.1 and a price-to-book ratio of three.
Due to the duplication among U.S.-based blue-chip
pharmaceuticals names, it does not make sense for investors to
own PJP and PPH simultaneously. Deciding between the two boils
down to what individual investors want: Biotech exposure or a
heavier concentration on stodgier pharma fare. With that in mind,
this ETF Showdown is a draw.
For more on ETFs, click
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