Launched on 06/23/2005, the Invesco Pharmaceuticals ETF (PJP – Free Report) is a smart beta exchange traded fund offering broad exposure to the Health Care ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is managed by Invesco. PJP has been able to amass assets over $265.71 million, making it one of the average sized ETFs in the Health Care ETFs. This particular fund seeks to match the performance of the Dynamic Pharmaceutical Intellidex Index before fees and expenses.
The Dynamic Pharmaceutical Intellidex Index is comprised of stocks of U.S. pharmaceutical companies. It is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including fundamental growth, stock valuation, investment timeliness and risk factors.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF’s expense ratio.
Annual operating expenses for PJP are 0.56%, which makes it on par with most peer products in the space.
PJP’s 12-month trailing dividend yield is 0.97%.
Sector Exposure and Top Holdings
It is important to delve into an ETF’s holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
For PJP, it has heaviest allocation in the Healthcare sector –about 100% of the portfolio.
When you look at individual holdings, Eli Lilly & Co (LLY – Free Report) accounts for about 5.37% of the fund’s total assets, followed by Abbvie Inc (ABBV – Free Report) and Merck & Co Inc (MRK – Free Report) .
Its top 10 holdings account for approximately 45.55% of PJP’s total assets under management.
Performance and Risk
Year-to-date, the Invesco Pharmaceuticals ETF has gained about 0% so far, and was up about 9.62% over the last 12 months (as of 01/01/2025). PJP has traded between $75.33 and $89.61 in this past 52-week period.
The ETF has a beta of 0.56 and standard deviation of 15.58% for the trailing three-year period, making it a high risk choice in the space. With about 32 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco Pharmaceuticals ETF is an excellent option for investors seeking to outperform the Health Care ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
VanEck Pharmaceutical ETF (PPH – Free Report) tracks MVIS US Listed Pharmaceutical 25 Index and the iShares U.S. Pharmaceuticals ETF (IHE – Free Report) tracks Dow Jones U.S. Select Pharmaceuticals Index. VanEck Pharmaceutical ETF has $589.36 million in assets, iShares U.S. Pharmaceuticals ETF has $606.06 million. PPH has an expense ratio of 0.36% and IHE charges 0.39%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Health Care ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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