ETF Talk: Here’s to Your Healthcare

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

In keeping with our sector theme for the previous two ETF Talks, the exchange-traded fund (ETF) that we are featuring today focuses on a sector that typically offers slow and steady growth. Today’s featured sector is healthcare. As long as there are people, healthcare will be needed to treat their illnesses, diseases and discomforts. As a result, the health-care sector profits from this ever-present reality. The Health Care Select Sector SPDR (XLV) covers a wide range of companies investing in various segments of the health-care industry.

This fund seeks investment results that, before expenses, correspond generally to the price and yield of companies in the Health Care Select Sector Index. That index includes companies from the pharmaceuticals, health-care equipment and supplies, health-care providers and services, biotechnology, life sciences tools and services and health-care technology industries.

Already up 3.98% in just the first few weeks of the year, XLV’s January growth follows a healthy 13.62% jump during 2012. The fund also offers a yield of 2.01%. Look for this fund to continue its steady growth, no matter what decisions are made in the nation’s capital. Indeed, ObamaCare should keep money flowing into healthcare one way or another.

Almost all of XLV’s holdings, 98.32%, are in the health-care sector, which is to be expected from a health-care ETF. The remaining 1.68% of the fund is invested in the technology sector. XLV also is rather heavily invested in its top 10 holdings, with 59.84% of its total assets residing there. Its top two holdings, Johnson & Johnson Common Stock and Pfizer, Inc. Common Stock, account for 12.64% and 12.01%, respectively. The remaining members of XLV’s top five are Merck & Company, Inc. Common Stock, 8.10%; Abbott Laboratories Common Stock, 5.71%; and Amgen Inc., 4.31%.

With most of its holdings in a sector largely independent of the inevitable and impending Washingtonian scuffles, and with ObamaCare likely to help certain industry companies, look for XLV and its ilk to produce profitable returns for the foreseeable future.

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful Investing newsletter. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to email me by clicking here. You just may see your question answered in a future ETF Talk.

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