The healthcare sector has been in the spotlight lately. President Donald Trump targeted drug companies and accused them of charging extremely high prices.
Market Movers
“Prescription drug prices are out of control. The drug prices have gone through the roof,” Trump said in a meeting, adding, “The drug companies frankly are getting away with murder. We want to bring our prices down to what other countries are paying.”
In a latest executive order, Trump aimed at scrapping a key component of Obamacare. The President said that he wanted to end subsidies to insurers that cost $7 billion this year and help millions of low-income Americans pay medical expenses.
The uncertainty was reduced to some extent as news of the two political parties coming to a bipartisan deal started doing the rounds. Senators of both parties said they reached a deal to stabilize Obamacare for the short term and allow insurer subsidies. However, changes in the deal might be in the cards as it has to be passed by the Congress and signed by Trump first.
“The solution will be for about a year or two years; it’ll get us over this intermediate hump,” Trump said. Let us now discuss two ETFs focused on providing exposure to the healthcare sector.
Health Care Select Sector SPDR Fund (XLV – Free Report)
This fund seeks to provide exposure to healthcare stocks and tracks the Health Care Select Sector Index. It has AUM of $17.6 billion and charges a moderate fee of 14 basis points a year. It has 62 holdings and bears significant concentration risk as almost 50% of the assets are allocated to the top 10 holdings.
From a sector look, the fund has high exposure to Pharmaceuticals, Biotech and Health Care Providers & Services, with 33.6%, 21.9%, and 19.1% exposure, respectively (as of Sep 30, 2017). The fund’s top three holdings are Johnson & Johnson (JNJ – Free Report), Pfizer (PFE – Free Report) and UnitedHealth (UNH – Free Report) with 11.1%, 6.8%, and 6.1% allocation, respectively (as of Sep 30, 2017). The fund has returned 17.9% in a year and 19.0% year to date (as of Oct 16, 2017). XLV currently has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
