The healthcare sector will continue to see political attention in 2018 with the 2017 U.S. tax reform bill influencing it in a number of ways. Its repeal of mandated healthcare is likely to change demand and effect provider participation. Industry experts believe the Republicans will also continue to take further actions on Obamacare provisions, seeking new changes and cost saving measures. Meanwhile, the lower tax rate will benefit all of corporate America and offer a significant advantage for pharmaceutical research and development.
Drug pricing and market competition will continue to be key political areas of focus for drug manufacturers. However, the pharmaceutical sector is one industry with tremendous potential to gain from tax cost savings poured into research and development. Across the globe, drug pricing will be a factor and the U.S.’s new tax advantage will help both large and small U.S. pharmaceutical drug manufacturers. The new landscape adds new opportunity to the sector for investors interested in pharmaceutical investments. Exchange-traded funds (ETFs) can be a great way to take advantage of these new opportunities with professional portfolio management and diversification across specific areas of the market.
Below we have selected the top five pharmaceutical ETFs based on year-to-date (YTD) returns as of December 28, 2017. These funds are showing significant momentum as they enter the new year and represent the top players in the healthcare pharmaceuticals category.
1. First Trust Nasdaq Pharmaceuticals ETF (FTXH)
Issuer: First Trust
Avg. Volume: 1,000
Net Assets: $2.1 million
Dividend Yield: 2.26%
YTD Return: 17.37%
Expense Ratio: 0.60%
FTXH is a pharmaceuticals ETF offered by First Trust. The ETF uses a replication approach to track the holdings and return of the Nasdaq U.S. Smart Pharmaceuticals Index. The Nasdaq U.S. Smart Pharmaceuticals Index is a customized index which focuses on U.S. companies. The Index includes the 30 most liquid pharmaceuticals stocks from the NASDAQ U.S. Benchmark Index. It then uses screening criteria and index weighting to manage the overall composition of the Index. The 30 stocks are screened and ranked by the following criteria: volatility – trailing 12-month price fluctuation, value – cash flow to price, and growth – the 3-, 6-, 9-, and 12-month average price appreciation. The results offer a customized investment approach for the sector.
In 2017, the Fund was the top performing ETF in the pharmaceutical sector…