Copyright 2009 TheStreet.com, Inc.All Rights Reserved
December 17, 2009 Thursday 06:00 AM EST
SECTION: PERSONAL FINANCE; ETF
LENGTH: 490 words
HEADLINE: ETFs for Health Care Quagmire
BYLINE: Don Dion, Portfolio Manager.At the time of publication, Dion did not have any positions in the equities mentioned.Don Dion is president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years’ experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.
NEW YORK (TheStreet) — With a massive government take-over of the healthcare industry looking less likely, shares of the iShares Dow Jones U.S. Healthcare Providers Index ETF(IHF:NYSE) and the PowerShares Dynamic Healthcare Services ETF(PTJ:NYSE) have jumped. It may not be too late to participate in the run-up. As the Senate continues to strip out provisions in the health care bill, IHF components like Wellpoint(WLP:NYSE), UnitedHealth Group(UNH:NYSE) and Aetna(AET:NYSE) could continue to move to the upside.Rather than buying into the health care sector as a whole, purchasing shares of IHF or PTJ allows investors to target the subsector of the health care industry most threatened by proposed reform: providers.Here’s a breakdown of these two targeted ETFs, and a recommendation for prospective investors. What They TrackIHF tracks the iShares Dow Jones U.S. Healthcare Providers Index Fund, a modified cap-weighted index that tracks 47 firms in the healthcare industry. The top component, UnitedHealth Group, comprises 11.33% of this ETF. More than 80% of this fund is allocated to large and medium cap companies.PTJ tracks the Dynamic Healthcare Services Intellidex Index, which uses factors like fundamental growth, stock valuation, investments and risk factors to rank health care companies. While PTJ has just 30 underlying components, the largest holding in the portfolio, WLP, makes up just 5.14% of the ETF. PTJ’s portfolio also encompasses a larger scope of health care firms: nearly 50% of the companies in PTJ’s portfolio can be classified as small cap.Despite differences in composition, PTJ and IHF share five out of their 10 top components. Both funds count UNH, WLP, Quest Diagnostics(DGX:NYSE), Laboratory Corp. of America(LH:NYSE) and Humana(HUM:NYSE) among their top holdings. Fees, Assets and LiquidityIHF has an expense ratio of 0.48%, while PTJ’s expense cap is 0.60%. Launched in May of 2006, IHF currently has $172 million in assets and a three-month average daily trading volume of 150,000 shares.PTJ, which was launched in October of 2006, has attracted just $12 million in assets, and has a three-month average daily trading volume of 8,500 shares. Performance and OutlookDuring the three-month period ending Dec. 15, IHF and PTJ advanced 11.13% and 10.23% respectively. Year to date, IHF is up more than 36%, while PTJ has increased just 18.13%.Looking forward, investors should consider their investment timeframe before selecting a health care provider fund. Since IHF is larger and more liquid fund, ETF investors looking to jump in and out of health care providers should stick with this fund.While PTJ hasn’t had the short-term pop that IHF has had, this fund’s more balanced portfolio should help to reduce volatility for long term investors. Since the average daily trading volume for this fund is relatively low, investors should not use PTJ for day trading.— Written by Don Dion in Williamstown, Mass.
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