Should You Invest in the Invesco Pharmaceuticals ETF (PJP)?

Zacks Equity Research
·3-min read

Looking for broad exposure to the Healthcare - Pharma segment of the equity market? You should consider the Invesco Pharmaceuticals ETF (PJP), a passively managed exchange traded fund launched on 06/23/2005.

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Healthcare - Pharma is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 8, placing it in top 50%.

Index Details

The fund is sponsored by Invesco. It has amassed assets over $267.69 million, making it one of the average sized ETFs attempting to match the performance of the Healthcare - Pharma segment of the equity market. PJP 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.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.57%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.93%.

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.

This ETF has heaviest allocation in the Healthcare sector--about 100% of the portfolio.

Looking at individual holdings, Abbvie Inc (ABBV) accounts for about 6% of total assets, followed by Merck & Co Inc (MRK) and Eli Lilly & Co (LLY).

The top 10 holdings account for about 56.76% of total assets under management.

Performance and Risk

The ETF has gained about 4.91% so far this year and is up about 8.02% in the last one year (as of 06/03/2024). In that past 52-week period, it has traded between $67.88 and $81.20.

The ETF has a beta of 0.61 and standard deviation of 15.56% for the trailing three-year period, making it a high risk choice in the space. With about 24 holdings, it has more concentrated exposure than peers.

Alternatives

Invesco Pharmaceuticals ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, PJP is a good option for those seeking exposure to the Health Care ETFs area of the market. Investors might also want to consider some other ETF options in the space.

VanEck Pharmaceutical ETF (PPH) tracks MVIS US Listed Pharmaceutical 25 Index and the iShares U.S. Pharmaceuticals ETF (IHE) tracks Dow Jones U.S. Select Pharmaceuticals Index. VanEck Pharmaceutical ETF has $568.99 million in assets, iShares U.S. Pharmaceuticals ETF has $677.12 million. PPH has an expense ratio of 0.36% and IHE charges 0.40%.

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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Invesco Pharmaceuticals ETF (PJP): ETF Research Reports

Merck & Co., Inc. (MRK) : Free Stock Analysis Report

Eli Lilly and Company (LLY) : Free Stock Analysis Report

AbbVie Inc. (ABBV) : Free Stock Analysis Report

iShares U.S. Pharmaceuticals ETF (IHE): ETF Research Reports

VanEck Pharmaceutical ETF (PPH): ETF Research Reports

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