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Is Invesco Dynamic Pharmaceuticals ETF (PJP) a Strong ETF Right Now?

A smart beta exchange traded fund, the Invesco Dynamic Pharmaceuticals ETF (PJP) debuted on 06/23/2005, and offers broad exposure to the Health Care ETFs category of the market.

What Are Smart Beta ETFs?

Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.

A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

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.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

The fund is sponsored by Invesco. It has amassed assets over $302.31 million, making it one of the average sized ETFs in the Health Care ETFs. This particular fund, before fees and expenses, seeks to match the performance of the Dynamic Pharmaceutical Intellidex Index.

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

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

Operating expenses on an annual basis are 0.58% for PJP, making it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 0%.

Sector Exposure and Top Holdings

Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.

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

When you look at individual holdings, Enanta Pharmaceuticals Inc (ENTA) accounts for about 5.74% of the fund's total assets, followed by Eli Lilly & Co (LLY) and Gilead Sciences Inc (GILD).

The top 10 holdings account for about 47.95% of total assets under management.

Performance and Risk

Year-to-date, the Invesco Dynamic Pharmaceuticals ETF has lost about -11.19% so far, and is down about -6.85% over the last 12 months (as of 10/03/2022). PJP has traded between $69.08 and $83.54 in this past 52-week period.

The fund has a beta of 0.72 and standard deviation of 22% for the trailing three-year period, which makes PJP a high risk choice in this particular space. With about 27 holdings, it has more concentrated exposure than peers.

Alternatives

Invesco Dynamic Pharmaceuticals ETF is a reasonable option for investors seeking to outperform the Health Care ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

IShares U.S. Pharmaceuticals ETF (IHE) tracks Dow Jones U.S. Select Pharmaceuticals Index and the VanEck Pharmaceutical ETF (PPH) tracks MVIS US Listed Pharmaceutical 25 Index. IShares U.S. Pharmaceuticals ETF has $389.99 million in assets, VanEck Pharmaceutical ETF has $561.37 million. IHE has an expense ratio of 0.39% and PPH charges 0.35%.

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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Invesco Dynamic Pharmaceuticals ETF (PJP): ETF Research Reports
 
Eli Lilly and Company (LLY) : Free Stock Analysis Report
 
Gilead Sciences, Inc. (GILD) : Free Stock Analysis Report
 
Enanta Pharmaceuticals, Inc. (ENTA) : Free Stock Analysis Report
 
iShares U.S. Pharmaceuticals ETF (IHE): ETF Research Reports
 
VanEck Pharmaceutical ETF (PPH): ETF Research Reports
 
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