As the Fed raised interest rates by 75 basis points for the second straight month in July to tame the multi-decade high inflation, recession fears have intensified. In addition, the U.S. economy contracted for the second straight quarter this year, making many analysts believe that a recession has already arrived.
Despite the persistent economic headwinds, the S&P 500 closed July as its best month in two years with a 12% gain. Better-than-expected corporate earnings primarily kept investor sentiment upbeat.
However, Ark Invest CEO Cathie Wood said the U.S. economy has already entered a recession. According to Ryan Detrick, the chief market strategist at Carson Group, investors should expect volatile highs and lows for the remainder of the year despite the July bounce back.
Amid the present macro challenges and market uncertainty, investing in healthcare ETFs might help generate steady returns due to inelastic demand for healthcare products and services.
Given the industry’s solid growth prospects, healthcare ETFs First Trust Nasdaq Pharmaceuticals ETF (FTXH), Vanguard Health Care Index Fund (VHT), and VanEck Vectors Pharmaceutical ETF (PPH) could be ideal long-term investments.
First Trust Nasdaq Pharmaceuticals ETF (FTXH)
FTXH tracks the 30 most liquid U.S. pharmaceutical companies, weighted according to value, volatility, and growth factors. It has a concentrated basket of 30 highly liquid pharmaceutical stocks weighted according to various factors.
With $44.90 million in assets under management, FTXH’s top holdings include Bristol-Myers Squibb Company (BMY) with a 7.92% weighting, Johnson & Johnson (JNJ) at 2.63%, and Gilead Sciences, Inc. (GILD) at 7.47%. Over the past month, the ETF's fund flows came in at $12.12 million. Its 0.60% expense ratio compares to the 0.50% category average.
Closing the last trading session at $26.18, the ETF is currently trading below its 52-week high of $28.40. FTXH's NAV stands at $26.14. The fund has a five-year monthly beta of 0.72, indicating less volatility than the broader market. The fund has gained 7.4% over the past year and 0.04% over the past months.
FTXH's POWR Ratings reflect this promising outlook. The ETF has an overall rating of B, which equates to Buy in our proprietary rating system.
FTXH has an A grade for Trade and Peer and a B for Buy & Hold. Of the 41 ETFs in the B-rated Health & Biotech ETFs group, FTXH is ranked #12.
Vanguard Health Care Index Fund (VHT)
VHT provides exposure to healthcare equities in the United States. It holds healthcare companies from a variety of industries throughout the healthcare spectrum. The fund diversifies its assets by imposing weighting limitations on regulated investment entities, such as a maximum of 25% of the index weight for any group company.
The fund has approximately $16.70 billion in assets under management (AUM). UnitedHealth Group Incorporated (UNH) is the top holding of VHT, with an 8.64% weighting, followed by JNJ and Pfizer Inc. (PFE), each with 8.35% and 5.27% weightings, respectively.
VHT has an expense ratio of 0.10% versus the category average of 0.50%. The fund has gained 1.7% over the past month. Over the past month, the ETF's fund flows came in at $245.64 million.
Closing the last trading session at $242.63, the ETF is currently trading below its 52-week high of $267.04. VHT's NAV stands at $242.90.
It is no surprise that VHT has an overall rating of B, which translates to Buy in our POWR Ratings system. It also has an A grade for Trade and Peer and a B for Buy & Hold. In addition, it is currently ranked #2 in the Health & Biotech ETFs group.
VanEck Vectors Pharmaceutical ETF (PPH)
PPH is among several options for exposure to the pharma industry, a part of the health care market capable of delivering big returns. It tracks a market-cap-weighted index of 25 of the largest global pharmaceutical firms.
The fund has $564.20 million in assets under management. Its top holdings are Eli Lilly and Company (LLY) with a 5.37% weighting, AstraZeneca PLC Sponsored ADR (AZN) at 5.23%, and Novo Nordisk A/S Sponsored ADR Class B (NVO) at 5.11%. PPH's 0.50% expense ratio compares to the 0.35% category average.
Closing the last trading session at $75.86, the ETF is currently trading below its 52-week high of $84.00. PPH's NAV stands at $76.30. The fund has a five-year monthly beta of 0.72, indicating less volatility than the broader market. The fund has gained 0.9% over the past year.
PPH’s POWR Ratings are consistent with its promising outlook. The ETF has an overall B rating, which equates to Buy in our proprietary rating system. It also has a B grade for Trade, Peer, and Buy & Hold. In the same group, it is ranked #9.
FTXH shares were trading at $26.59 per share on Wednesday afternoon, up $0.41 (+1.57%). Year-to-date, FTXH has declined -1.41%, versus a -12.11% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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