Should You Invest in the VanEck Biotech ETF (BBH)?

Looking for broad exposure to the Healthcare - Biotech segment of the equity market? You should consider the VanEck Biotech ETF (BBH), a passively managed exchange traded fund launched on 12/20/2011.

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Healthcare - Biotech is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 7, placing it in top 44%.

Index Details

The fund is sponsored by Van Eck. It has amassed assets over $428.39 million, making it one of the average sized ETFs attempting to match the performance of the Healthcare - Biotech segment of the equity market. BBH seeks to match the performance of the MVIS US Listed Biotech 25 Index before fees and expenses.

The MVIS US Listed Biotech 25 Index tracks the overall performance of companies involved in the development and production, marketing and sales of drugs based on genetic analysis and diagnostic equipment.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.35%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 0.43%.

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 100% of the portfolio.

Looking at individual holdings, Amgen Inc (AMGN) accounts for about 16.70% of total assets, followed by Vertex Pharmaceuticals Inc (VRTX) and Gilead Sciences Inc (GILD).

The top 10 holdings account for about 74.63% of total assets under management.

Performance and Risk

The ETF has gained about 0.93% so far this year and it's up approximately 5.11% in the last one year (as of 06/17/2024). In that past 52-week period, it has traded between $143.93 and $170.60.

The ETF has a beta of 0.76 and standard deviation of 22.02% for the trailing three-year period, making it a high risk choice in the space. With about 25 holdings, it has more concentrated exposure than peers.

Alternatives

VanEck Biotech ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, BBH 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.

SPDR S&P Biotech ETF (XBI) tracks S&P Biotechnology Select Industry Index and the iShares Biotechnology ETF (IBB) tracks Nasdaq Biotechnology Index. SPDR S&P Biotech ETF has $6.91 billion in assets, iShares Biotechnology ETF has $7.35 billion. XBI has an expense ratio of 0.35% and IBB charges 0.45%.

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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VanEck Biotech ETF (BBH): ETF Research Reports

Amgen Inc. (AMGN) : Free Stock Analysis Report

Gilead Sciences, Inc. (GILD) : Free Stock Analysis Report

Vertex Pharmaceuticals Incorporated (VRTX) : Free Stock Analysis Report

iShares Biotechnology ETF (IBB): ETF Research Reports

SPDR S&P Biotech ETF (XBI): ETF Research Reports

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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