Best Biotech ETFS :Part 2

 

Best Biotech ETF

 Data Source: Yahoo finance

Biotech ETF is famous for its volatility. However, Best biotech ETF can bring incredible return which is not expected from S&p 500 return or Dow jones index. Biotech ETF return can be more than 100 percent year after year. With  right investment decision  and  proper risk management, Biotech ETF could be lifetime  windfall gain for the investors. Since biotech is highly volatile associated with high yearly return, investors and stock traders has to define what  is good biotech ETF . The best biotech ETF for 2016 are the 5 listed biotech ETF according to our analysis.

Best Biotech ETFs
Best 5 Biotech ETFs for 2016 (Performance)

Data Source: Yahoo finance

IBB ETF (iShares Nasdaq Biotechnology):

IBB is most popular ,reliable  and less risky biotech ETF . This is the  number one biotech in our list of best biotech etf  for 2016. Even experienced stock traders and investors know IBB as only biotech stock in the stock market and consider this ETF as a gauge of biotech stock market performance. Since its inception from 2001, IBB is the leading biotech ETF in the market.  This ETF is comprised with  leading biotech stocks(78 %), pharmaceutical stocks(14%) and life science tools and services (7 %). Top biotech stocks that are part of IBB ETF are Amgen inc(AMGN), GILD(Gilded science),BIIB(Biogen inc),) which are  24 percent of ETF holding.IBB’s asset under management is $6.8 billion.

 

Top 10  IBB holdings Holdings (57.61% of Total Assets)

 

 

Company Symbol % Assets
Amgen Inc. AMGN 8.24
Gilead Sciences, Inc. GILD 8.23
Biogen Inc. BIIB 7.84
Celgene Corporation CELG 7.76
Regeneron Pharmaceuticals, Inc. REGN 7.05
Illumina, Inc. ILMN 4.22
Mylan N.V. MYL 4.02
Alexion Pharmaceuticals, Inc. ALXN 3.86
Vertex Pharmaceuticals Incorpor VRTX 3.63
Incyte Corporation INCY 2.76

  Source: Yahoo finance

IBB Performance:

Year over year IBB beats the market with big margin. IBB is up 190 percent from 2011 to present whereas Dow jones index and S&P 500 index was up during the same time period only  52.45 % and 62.97 %.  Ibb beats the market clearly double digit margin even though IBB holdings lost its   29 percent value in just January and February 2016 and still 20 percent down from its 2015 close. Last 3 years ETF had 49 percent average  return whereas S&P 500 average return was  14 percent only.

IBB ETF Performance
IBB ETF Performance

Data Source: Yahoo finance 

Liquidity:

Currently ETF 50 day moving average trading volume is close 2.5 million share.  That means etf has great liquidity.  liquidity  is one of the major concerns in investing especially for    day  trading because momentum trader and swing trader take position based on liquidity of the stock or etf. Stock over 1 million daily trading volume is considered a most liquid stock or etf for trading.  Volume is also important for long term investors or position traders because  more volume means more liquidity .Investors  can  leave his positions in liquid stocks with ease  if something wrong happened to the etf  than  the low volume stock or etf.

 

 

 

IBB Chart
IBB ETF Chart

Technical Analysis:

 IBB chart formed a W pattern in recent days. W pattern cleared the neck line and broke out with big volume .After successful broke outs, ETF retested its neckline and started to move upward. This is a  sign that ETF has very strong support and will move  to the upside. Now we have to watch how IBB ETF breaks or handles 100 day simple moving average at $288 and 200 day simple moving average at $316. ETF next move  target should be $340.

 

SPDR S&P Biotech

 

XBI is 2nd  best biotech etf in our  list for 2016.  Since its inception from 2006, XBI is one of the major etf of the stock market. XBI holdings are composed of small micro cap stock pure biotech stocks  and greatly diversified its risk as ETF gives equal importance to the its each holdings.  Currently this ETF has stock components in its portfolio. Top holdings of this ETF are ACADIA Pharmaceuticals Inc(ACAD) ,  medivation inc(MDVN), Neurocrine Biosciences, Inc (NBIX), Intercept Pharmaceuticals, Inc (ICPT). This 10 holdings are 21 percent of the ETF total asset.

 

 

 

Top 10  XBI Holdings (21% of Total Assets)

 
ACADIA Pharmaceuticals Inc. ACAD 2.68
Medivation, Inc. MDVN 2.28
Neurocrine Biosciences, Inc. NBIX 2.16
Intercept Pharmaceuticals, Inc. ICPT 2.12
Novavax, Inc. NVAX 2.05
Ligand Pharmaceuticals Incorpor LGND 2.04
Seattle Genetics, Inc. SGEN 2.04
Ultragenyx Pharmaceutical Inc. RARE 2.04
Amgen Inc. AMGN 2.01
Alkermes plc ALKS 2.01

 Source: Yahoo finance

 

 XBI Performance:

ETF is famous for its greatly diversified portfolio and beats the major index funds including dow jones index, S&P 500 index. Last 5 year index average return was 48 %. Even in the 2015 while  most of the index return was negative or close to zero, XBI return was 13 % percent.

XBI ETF Performance
XBI ETF Performance

DataSource: Yahoo finance

Liquidity:

XBI’s current asset under management is more than $2 billion and  average trading volume is more than 7.5 million. Trading volume over 1 million indicates high liquidity for stock and ETF. Since XBI trading volume is close 8 million, this ETF has great liquidity and investors and stock traders could easily hand over the etf if something goes wrong.

 

XBI ETF
XBI ETF Chart

Technical Analysis:

XBI  chart looks bullish as it break the base  april 5, 2016 with strong volume.  ETF retested the neckline and  holding above the neckline. From December 31 2015 to  February 2016, ETF was down 37 percent  from its December close. Currently etf is traded at $55 range. ETF needs to move at least 22 percent  to regain its yearly loss and catch up with major index. Currently SPX and dow jones index  both recovered its yearly loss and up more than 1 percent  for the year. ETF needs to move almost 100 % to regain its recent high $91 price range. Because of its previous performance this is achievable for the ETF .