Comparing the iShares U.S. Pharmaceuticals ETF (NYSEMKT:IHE) and the VanEck Biotech ETF (NASDAQ:BBH) reveals two distinct fund profiles. IHE tracks established, blue chip pharmaceutical companies, while BBH zeroes in on the research-intensive biotech space. Here's how those different strategies stack up in terms of cost, yield, and risk.
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-year return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
The two funds are priced competitively — BBH carries a 0.35% expense ratio, while IHE charges 0.38%. There's a bigger difference when it comes to income. IHE offers a notably higher yield, with a full 1-percentage-point advantage over BBH.
Launched in 2006, IHE tracks a benchmark of domestic pharmaceutical stocks and currently holds 56 different securities. Its largest positions include Johnson & Johnson (NYSE:JNJ) at 22.44%, Eli Lilly (NYSE:LLY) at 22.3%, and Merck (NYSE:MRK) at 4.6%. By focusing on mature pharmaceutical firms, the fund offers a healthcare portfolio with lower price volatility than pure-play biotech funds.
BBH aims to replicate the MVIS US Listed Biotech 25 Index, maintaining a lean portfolio of just 25 stocks. Its top holdings include Amgen (NASDAQ:AMGN) at 15.1%, Gilead Sciences (NASDAQ:GILD) at 12.8%, and Vertex Pharmaceuticals (NASDAQ:VRTX) at 9.1%. The fund specifically targets companies involved in genetic research and diagnostic technologies. BBH launched in 2011.
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Choosing between these two ETFs is really a question of what role you want a healthcare fund to play in your portfolio.
IHE is built for investors who want blue chip stability: its top two holdings alone, Johnson & Johnson and Eli Lilly, make up nearly 45% of the fund. This is a concentrated bet on a group of proven, profitable drugmakers with diversified revenue streams. That's a big part of why it has held up better historically during downturns and pays a more attractive dividend.
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