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Proprietary Data Insights Financial Pros Biotech ETF Searches in the Last Month
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Moderna (MRNA) shares exploded this week after the company announced positive news regarding its cancer vaccine. Unsurprisingly, both financial pros’ and retail investors’ searches for the stock skyrocketed. But a secondary beneficiary got a boost as well: iShares Biotechnology ETF (IBB). Moderna is a top-five holding of the ETF, and one of the main reasons financial pros have been searching IBB is for ways to get exposure to the MRNA. But is IBB’s exposure to Moderna enough to make the ETF a buy? iShares Biotechnology ETF The iShares Biotech ETF tracks the investment results of an index of U.S.-listed biotech stocks. With 366 holdings in its portfolio, IBB offers diversified access to the biotech sector. Key Facts About IBB
Out of the 366 tickers IBB holds, its 10 biggest holdings are large-cap biotech stocks that make up 54.4% of IBB’s portfolio weight. Source: iShares The largest holding in the portfolio is Gilead Sciences (GILD) with a weight of 9.97%. Performance Source: iShares IBB has been trading since February 5, 2001, giving it a rich track record. As of Q3 2022, it’s delivered 263% cumulative returns since its inception. Over the last five years, its cumulative returns have been 6.5%. They’ve been 18.4% over the last three. Trading & Investing in IBB IBB trades actively, with daily volume averaging approximately 2 million shares. You can trade weekly, monthly, and LEAP options on IBB. The fund pays an annual dividend of $0.35 per share, a yield of 0.26%, which isn’t high. But then again, most biotech investors look for growth, not dividends. Competition Folks who want biotech exposure aren’t limited to IBB. In fact, there are several options on the table, including SPDR S&P Biotech ETF (XBI), ARK Genomic Revolution Multi-Sector ETF (ARKG), First Trust NYSE Arca Biotechnology Index Fund (FBT), and VanEck Biotech ETF (BBH). Portfolio Composition
IBB offers the greatest diversification with 366 positions in its portfolio, followed by XBI with 155. The most concentrated portfolio is BBH with 25 positions, followed by FBT with 30. Fees
IBB charges an expense ratio of 0.44%. The asset class’ median is 0.52%. IBB, XBI, and BBH are below the median. Meanwhile, FBT and ARKG are relatively expensive. Performance Over the Last Five Years (Cumulative Returns)
Over the last five years, the top performer has been ARKG with a cumulative return of 36.1%, followed by BBH at 35.8%. The worst performer is XBI at 1.7%. That’s interesting, considering it has a similar investment profile to ARKG. Dividend Yield
FBT offers the most attractive dividend yield at 1.4%. But the ETFs in this group need to distribute more significant dividends to bring in income investors.
Our Opinion 7/10 Shares of IBB are down 10.8% YTD. History tells us this drawdown is a buying opportunity. IBB gives investors a chance to easily gain exposure to the biotech sector. We like it as a long-term investment to buy on pullbacks. |
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