Healthcare ETFs appear as a promising investment alternative amidst the rising healthcare costs, rising demand for personalized medicines, and rapid innovations. The segment offers portfolio diversification, stability, and robust long-term growth opportunities.

Amid this backdrop, investors might consider investing in fundamentally solid healthcare ETFs First Trust Health Care AlphaDEX Fund (FXH), iShares Biotechnology ETF (IBB), and iShares U.S. Medical Devices ETF (IHI) for a resilient portfolio.

Owing to its essential nature and ability to sustain itself through economic downturns and market volatility, investing in the healthcare industry appears to be a suitable choice. The industry not only offers stability and resilience against the market, but amid the ongoing digitalization, R&D efforts, increasing investments, and innovations, it is opening exponential growth prospects for investors.

The growing aging population, innovations in biotechnology, and the adoption of artificial intelligence (AI) are contributing to the healthcare industry’s evolution.

The healthcare segment’s outlook for 2025 also appears mostly optimistic. As per a survey by the Deloitte Center for Health Solutions, around 60% of industry leaders are holding a positive industry outlook for the year ahead with trends like dynamic strategies depending on regulatory and policy changes, cost efficiency improvements, and investments in technology platforms navigating the course.

Further, the global healthcare services market is projected to reach around $22.57 trillion by 2031, exhibiting growth at a CAGR of 8.3% driven by an increase in healthcare spending, adoption of digital tools to improve efficiency and reduce costs, and the rise of telemedicine.

Given the industry’s encouraging trends, let’s delve deeper into the fundamentals of the top three Health & Biotech ETFs, beginning with number 3.

ETF #3: First Trust Health Care AlphaDEX Fund (FXH)

FXH is an ETF that offers exposure to the U.S. healthcare sector, especially to the biotechnology and healthcare providers segment. Stocks are selected and weighted based on growth and value factors. The fund seeks to track the performance of the StrataQuant Health Care Index.

The fund has assets under management (AUM) of $1.12 billion. FXH’s top holdings include Natera, Inc. (NTRA) with a 3.14% weighting, followed by Doximity, Inc. Class A (DOCS) at 2.86%, and Insulet Corporation (PODD) and Jazz Pharmaceuticals Public Limited Company (JAZZ) at 2.67% and 2.63%, respectively.

The ETF has a total of 78 holdings, with its top 10 assets comprising 25.62% of its AUM. FXH’s expense ratio is 0.62%, higher than the category average of 0.52%.

FXH pays an annual dividend of $0.43, which translates to a yield of 0.41% at the current price level.

FXH has surged 1.5% over the past six months and 4.6% over the past year to close the last trading session at $106.05. It has a beta of 0.80. The fund’s NAV was $106.14 as of December 17, 2024.

FXH’s POWR Ratings reflect solid prospects. The fund has an overall rating of B, translating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

FXH has a B grade for Trade and Buy & Hold. Within the Health & Biotech ETFs group, it is ranked #12 of the 42 ETFs.

To access all FXH’s POWR Ratings, click here.

ETF #2: iShares Biotechnology ETF (IBB)

IBB tracks a market-cap-weighted index of US biotechnology companies listed on US exchanges. The fund’s portfolio consists of companies engaged in the R&D of therapeutic treatments but is not focused on the commercialization and mass production of pharmaceutical drugs. The ETF tracks the ICE Biotechnology Index.

With $6.58 billion in AUM, IBB’s top holdings are Gilead Sciences, Inc. (GILD), having a 10.03% weighting, Vertex Pharmaceuticals Incorporated (VRTX) at 8.07%, and Amgen Inc. (AMGN) and Regeneron Pharmaceuticals, Inc. (REGN) at 6.99% and 5.32%, respectively. The ETF has a total of 209 holdings, with its top 10 assets comprising 48.05% of its AUM.

The fund has an expense ratio of 0.45%, lower than the category average of 0.52%. Also, it has a beta of 0.84.

IBB’s annual dividend of $0.39 translates to a 0.33% yield at the current price level. Moreover, the fund’s dividend payouts have increased at a CAGR of 6.7% over the past three years and at 13.2% over the past five years.

IBB has gained 3.9% over the past month and 5.2% over the past year to close the last trading session at $137.66. The fund’s NAV was $137.64 as of December 17, 2024.

IBB’s sound fundamentals are reflected in its POWR Ratings. The fund has an overall rating of B, equating to a Buy in our proprietary rating system.

The fund has a B grade for Trade and Buy & Hold. Of the 42 ETFs in the same group, IBB is ranked #10.

Click here to see all the IBB ratings.

ETF #1: iShares U.S. Medical Devices ETF (IHI)

IHI targets the U.S. companies engaged in the medical devices segment within the healthcare industry. It tracks a market-cap-weighted index of manufacturers and distributors of medical devices which have more stable revenue streams and less pipeline complications. It tracks the DJ US Select / Medical Equipment Index.

The fund has an AUM of $4.58 billion. Its top holdings include Abbott Laboratories (ABT) with a 16.51% weighting, followed by Intuitive Surgical, Inc. (ISRG) at a 16.02% weighting, and Stryker Corporation (SYK) and Boston Scientific Corporation (BSX) at 10.75% and 4.85%, respectively. IHI has a total of 49 holdings, with the top 10 assets comprising 73.74% of its AUM.

The fund has an expense ratio of 0.40%, compared to the category average of 0.52%. Also, it has a beta of 0.85.

IHI’s annual dividend of $0.27 translates to a 0.44% yield at the current price level. Further, the fund’s dividend payouts have increased at a CAGR of 20% over the past three years and 14.1% over the past five years.

IHI has gained 6.4% over the past six months and 12% over the past year to close the last trading session at $59.40. The fund has a NAV of $59.45 as of December 17, 2024.

IHI’s POWR Ratings project its strong prospects. The fund has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.

IHI has an A grade for Buy & Hold and Trade. It also has a B grade for Peer. The fund is ranked first among the 42 ETFs in the Health & Biotech ETFs group.

To access all the POWR Ratings for IHI, click here.

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IBB shares . Year-to-date, IBB has declined -2.37%, versus a 24.51% rise in the benchmark S&P 500 index during the same period.

About the Author: Rjkumari Saxena

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions. More...

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