Yahoo Finance Is Invesco Pharmaceuticals ETF (PJP) a Strong ETF Right Now?
Designed to provide broad exposure to the Health Care ETFs category of the market, the Invesco Pharmaceuticals ETF (PJP) is a smart beta exchange traded fund launched on 06/23/2005.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
PJP is managed by Invesco, and this fund has amassed over $274.97 million, which makes it one of the average sized ETFs in the Health Care ETFs. PJP, before fees and expenses, seeks to match the performance of the Dynamic Pharmaceutical Intellidex Index.
The Dynamic Pharmaceutical Intellidex Index is comprised of stocks of U.S. pharmaceutical companies. It is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including fundamental growth, stock valuation, investment timeliness and risk factors.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Operating expenses on an annual basis are 0.57% for this ETF, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 0.94%.
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.
For PJP, it has heaviest allocation in the Healthcare sector --about 100% of the portfolio.
When you look at individual holdings, Abbvie Inc (ABBV) accounts for about 6% of the fund's total assets, followed by Merck & Co Inc (MRK) and Eli Lilly & Co (LLY).
PJP's top 10 holdings account for about 56.76% of its total assets under management.
Performance and Risk
The ETF return is roughly 8.63% so far this year and was up about 11.44% in the last one year (as of 06/28/2024). In the past 52-week period, it has traded between $67.88 and $82.97.
The fund has a beta of 0.59 and standard deviation of 15.42% for the trailing three-year period, which makes PJP a high risk choice in this particular space. With about 24 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco Pharmaceuticals ETF is a reasonable option for investors seeking to outperform the Health Care ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
VanEck Pharmaceutical ETF (PPH) tracks MVIS US Listed Pharmaceutical 25 Index and the iShares U.S. Pharmaceuticals ETF (IHE) tracks Dow Jones U.S. Select Pharmaceuticals Index. VanEck Pharmaceutical ETF has $596.69 million in assets, iShares U.S. Pharmaceuticals ETF has $679.93 million. PPH has an expense ratio of 0.36% and IHE charges 0.40%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Health Care ETFs.
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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Invesco Pharmaceuticals ETF (PJP): ETF Research Reports
Merck & Co., Inc. (MRK) : Free Stock Analysis Report
Eli Lilly and Company (LLY) : Free Stock Analysis Report
AbbVie Inc. (ABBV) : Free Stock Analysis Report
iShares U.S. Pharmaceuticals ETF (IHE): ETF Research Reports
VanEck Pharmaceutical ETF (PPH): ETF Research Reports
