3 Healthcare ETFs Riding High – XHE, IHI, AXHE

| November 1, 2013 | 0 Comments

Healthcare IndustryThe rollout of Obamacare has been a train wreck…

The main culprit has been the healthcare.gov website.  This site serves as the marketplace for individuals in 36 states to shop for health insurance.

There’s just one little problem… the site doesn’t work.  A new report shows only six people were able to sign up for insurance on the first day the government-run website opened for business.

Needless to say, this is a huge embarrassing failure for President Obama.

Despite these problems, healthcare ETFs continue to post solid gains.  Let’s take a look at the three top performing healthcare ETFs over the last four weeks.

SPDR S&P Health Care Equipment ETF (XHE)

XHE is the top performing healthcare ETF over the last four weeks.  It’s up 5.5% over that time.  It’s currently trading for $72.99.  And it’s up 33% year-to-date.

This fund holds 58 stocks of medical device makers.  Each stock is given an equal weighting in XHE.  And it carries an expense ratio of 0.35%.

It’s somewhat surprising to see medical equipment makers leading the sector higher considering the medical device tax was one the sticking points in the government shutdown.

One reason investors remain optimistic about medical device companies is the launch of a free trade zone in Shanghai, China.  The usually strict rules governing health insurance, hospitals, and capital equipment leases have been temporarily reduced for a trial period of three years.

The medical device makers already operating there stand to benefit from lower tariffs and increased demand as hospital services are deregulated.

China imported $1.7 billion worth of medical devices from the US in 2012.  And demand for medical devices is expected to grow 11% annually over the next five years. 

iShares US Medical Devices ETF (IHI)

Not surprisingly, iShares medical device ETF has been on a roll as well.  IHI is up 5.4% over the last four weeks to $89.00.   

It currently holds 41 stocks of medical equipment companies such as magnetic resonance imaging (MRI) scanners, prosthetics, pacemakers, X-ray machines, and other non-disposable medical devices.  These stocks are weighted using a representative sampling strategy. 

The top holdings are Medtronic (MDT), Thermo Fisher Scientific (TMO), and Covidien (COV).  It has an expense ratio of 0.45%.

iShares MSCI ACWI ex US Healthcare ETF (AXHE)

AXHE is another healthcare ETF performing well lately.  It’s up 4.7% over the last four weeks to $78.00 per share.

This ETF is composed of 84 healthcare stocks from outside the US.  It has an expense ratio of 0.48%.

Needless to say, avoiding US healthcare stocks has a certain amount of appeal with all of the uncertainty with Obamacare here in the US.

But this thinly traded ETF only has $11.7 million in assets under management.  That puts it at risk of be closed down because there simply isn’t enough investor interest in this ETF.

Despite the recent performance, I’d avoid this also ran ETF. 

Here’s the upshot…

The debacle of the Obamacare rollout is a black eye for the President’s signature piece of legislation.  But the new free trade zone in China should mean strong growth for medical equipment companies over the next few years.  A good medical equipment ETF, like XHE or IHI, should reap the rewards of a strong uptick in sales to China.

Good Investing,

Corey Williams

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Category: ETFs, Sector ETFs, What's Going On?

About the Author ()

Corey Williams is the editor of Sector ETF Trader, an investment advisory service focused on profiting from ETFs and the economic cycle. Under Corey’s leadership, the Sector ETF Trader has become one of the most popular and successful ETF advisories around. In addition to his groundbreaking service, Corey is the lead contributor to ETF Trading Research, where he shares his insights about ETFs and financial markets three times a week. He’s also a regular contributor to the Dynamic Wealth Report and the editor of one the hottest option trading services around – Elite Option Trader.

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