Starting this week, we’ll be featuring some of the top-performing momentum exchanged-traded funds (ETFs) in our column.
Today’s featured fund, Invesco DWA Healthcare Momentum ETF (PTH), provides an alternate take on U.S. health care firms. Momentum funds attempt to employ a price momentum strategy, which aims to profit from proven trends in the market.
An example of this strategy is when a trader takes a long position in an asset that has shown an upward trending price in the hopes of reaping additional upside potential. Founded in October 2006, PTH has been around for over a decade but only in 2014 did the fund switch to track a momentum-weighted index, which moved the ETF away from exposure to the neutral segment in larger U.S. health care firms toward segments that are much more growth-focused.
In addition, the fund also places an emphasis on biotech and research sectors. As a result, the fund has a bias towards small-caps and carries considerably more risk.
PTH has proven itself to be quite good at capturing the upward momentum in many health care breakthroughs in 2018, returning 22.68% year to date. Its return of 42.92% over the past 12 months is even more impressive. According to Zacks Research, several analysts have given PTH a one-year price target of $105.66, which translates into an 18% upside for PTH.
However, many small traders shy away from PTH due to its small trading volume (just $2.53 million a day) and large spreads. This is less of an issue for institutional traders as the fund mainly trades in large blocks. Interested investors definitely should do their due research before any commitment. The fund’s expense ratio is 0.60% and does not pay a distribution.
Chart courtesy of Stockcharts.com
PTH’s top holdings are Teladoc Health (TDOC), 3.67%; Align Technology (ALGN), 3.59%; Immunomedics (IMMU), 3.57%; Abiomed (ABMD), 3.50%; and Sarepta Therapeutics (SRPT), 3.14%.
Strong performance from Teladoc, a fast-growing telehealth company that connects doctors to patients using technologies such as remote videoconferencing and mobile devices, has fueled a portion of PTH’s growth. Teladoc’s stellar first-quarter earnings report on May 2 sent its stock rallying more than 21%. This is just one of the many underlying catalysts that have driven PTH’s strong upward momentum over the past year.
For investors interested in a growth-oriented play in the health care field, they can look to Invesco DWA Healthcare Momentum ETF (PTH) as a potential candidate to buy.