The overall trajectory for healthcare ETFs remains positive, fueled by factors such as an aging population, increased demand for healthcare services, and technological advancements. Given this positive sentiment, adding healthcare ETFs such as iShares Biotechnology ETF (IBB), SPDR S&P Health Care Equipment ETF (XHE), and iShares U.S. Medical Devices ETF (IHI) might be optimal defensive investing.

The rising need for personalized medication, along with the growing adoption of biotechnology in stem cell research and cloning techniques to replace damaged cells and tissues in regenerative medicines, is primarily driving the global biotechnology market.

Additionally, the global biotechnology market has been growing rapidly in recent years, driven by several factors, such as increasing demand for innovative treatments for chronic diseases, rising investments in research and development, technological advances, and increasing government support. The global biotechnology market is expected to grow at a CAGR of 11.5% by 2034.

With that in mind, let’s look at the fundamentals of the top three Health & Biotech ETFs, beginning with the third one.

ETF #3: iShares Biotechnology ETF (IBB)

IBB offers exposure to the biotech sub-sector of the healthcare industry, serving up access to a group of stocks that can thrive on technological breakthroughs and increased investment in medical processes.

With $6.56 Billion in AUM, its top holdings are Gilead Sciences, Inc. (GILD) with an 8.6% weighting, Amgen Inc. (AMGN) at 7.9%, and Regeneron Pharmaceuticals, Inc. (REGN) at 6.8% weight.

The ETF’s expense ratio is 0.45%, compared to the category average of 0.52%. IBB’s fund outflows were $35.95 million over the past month.

IBB has gained marginally intraday to close the last trading session at $134.67. It has a five-year beta of 0.84. The fund’s NAV was $134.06 as of December 27, 2024.

IBB’s POWR Ratings reflect this promising outlook. The ETF’s overall B rating equates 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.

The fund has a B grade for Buy & Hold. IBB is ranked #8 out of 42 stocks in the Health & Biotech ETFs ETF. Click here to access all the IBB ratings.

ETF #2: SPDR S&P Health Care Equipment ETF (XHE)

XHE offers targeted exposure to the healthcare equipment space, a targeted sector of the healthcare industry that includes manufacturers of various equipment and supplies. XHE will likely appeal to those looking to implement a tactical tilt toward a specific corner of the U.S. markets.

With $213.60 million in AUM, the fund has a total of 15 holdings. XHE’s top holding is QuidelOrtho Corporation (QDEL) with a 2% weighting, followed by Tandem Diabetes Care, Inc. (TNDM) with a 2% weighting.

XHE has an expense ratio of 0.35%, lower than the category average of 0.52%. It currently has a NAV of $89.54. Its fund inflows came in at $18.29 thousand over the past month.

The fund’s annual dividend of $0.03 yields 0.04% on the current share price. Its four-year average yield is 0.02%. Its dividend payout has increased at a CAGR of 154.7% over the past three years.

XHE has gained 6.2% over the past year and 6.6% over the past nine months to close the last trading session at $90.32.

XHE’s POWR Ratings reflect solid prospects. Its overall rating of A equates to a Strong Buy in our proprietary rating system.

XHE has an A grade for Buy & Hold and Peer and a B for Trade. Of the 42 ETFs in the same group, it is ranked #3. Get all XHE ratings here.

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

IHI focuses on an interesting and often forgotten segment of the healthcare industry: the medical device makers. Companies in this segment tend to have more stable revenue streams, fewer issues with patent pipelines, and are often much smaller than their counterparts in big pharma.

With $4.44 billion in AUM, IHI’s top holding is Abbott Laboratories (ABT), with a 16.7% weighting, followed by Intuitive Surgical, Inc. (ISRG), with a 16.1% weighting, and Boston Scientific Corporation (BSX), with 11.3%.

IHI has an expense ratio of 0.40%, lower than the category average of 0.52%. It currently has a NAV of $59.31. Its fund outflows came in at $356.37 million over the past month.

The ETF pays an annual dividend of $0.27, which yields 0.46% on the current price. It has a four-year average dividend yield of 0.39%. Its 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 10.4% over the past year and 3.7% over the past nine months to close the last trading session at $59.56.

IHI’s POWR Ratings reflect its promising prospects. The ETF’s overall A rating equates to a Strong Buy in our proprietary rating system.

IHI has an A grade for Buy & Hold, Peer, and Trade. In the same ETF group, it is ranked first. Click here to access all of IHI’s POWR Ratings.

What To Do Next?

Get your hands on this special report with 3 low priced companies with tremendous upside potential even in today’s volatile markets:

3 Stocks to DOUBLE This Year >

XHE shares were trading at $89.00 per share on Friday afternoon, down $1.32 (-1.46%). Year-to-date, XHE has gained 5.66%, versus a 26.63% rise in the benchmark S&P 500 index during the same period.

About the Author: Nidhi Agarwal

Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities. More...

More Resources for the Stocks in this Article