D rugmakers delivered tasty returns to investors in July.
Pharmaceutical ETFs topped peers holding broadly diversified
health care stocks as well as those focused on red-hot
PowerShares Dynamic Pharmaceuticals (
) lags its pharma ETF peers this month despite a 3.6% rise. But
it leads year to date with a 22% advance, and over longer
It produced an annual average 35% gain over five years vs. 30%
forSPDR S&P Pharmaceuticals (
The $2.14 billion ETF holds several IBD Sector Leaders in its
24-stock portfolio, includingAllergan (
) andLannett (LCI). Megacap leadersJohnson & Johnson
(JNJ),Merck (MRK) andPfizer (PFE) are also found here.
Pharmaceuticals account for 72% of assets and biotechs 22%.
PJP screens for holdings based on price momentum, earnings
momentum, quality, management and value. It skews towards
large-cap and growth stocks, and rebalances quarterly.
XPH tracks an equal-weighted index. As a result, this $1.16
billion ETF skews more towards small- and midcaps. But its 39
stock holdings still include the likes of Pfizer and J&J.
XPH has a 0.35% expense ratio vs. 0.58% for PJP.
"The pharmaceutical industry is enjoying a secular tailwind
propelled by the aging population," writes Morningstar analyst
Robert Goldsborough. "Big Pharma growth rates have turned around
after patent losses peaked in 2012. Pharmaceutical firms also
should benefit from improving pipelines and cost-cutting."
With recent view-topping earnings reports, they're proving
their mettle for
. Gilead gained 2% Wednesday after crushing earnings estimates
and raising sales guidance. The California-based company, an HIV
drug leader, is now a formidable player in the hepatitis C market
with its blockbuster Sovaldi.
Amgen (AMGN), the No. 3 holding in PJP, reports today. No. 1
holdingDepomed (DEPO) reported Wednesday. The maker of pain
medication beat views on Q2 revenue and raised guidance.
Biotechs, generic-drug makers and ethical-drug makers are
ranked in the top 10 among 197 industry groups tracked by IBD.
Both PJP and XPH fell on the
stock market today
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