It was an excellent week to have money invested in the healthcare sector. Every single one of the most popular exchange-traded funds that focus on the space ended the short week up at least 1.5%, easily outpacing the returns of the S&P 500 over the same time frame.
This week's top performing healthcare ETF was the iShares Dow Jones US Pharmaceuticals ETF (IHE 0.41%), which gained 2.86% over the past four trading sessions and left the famous index in the dust.
So what's was the secret to the IHE's success this week? Let's take a closer look at the inner workings of this fund to see if we can figure out an answer.
iShares Dow Jones US Pharmaceuticals ETF key statistics
| Inception Year | 2006 |
| Number of Holdings | 42 |
| Net Assets | $644 million |
| Average P/E Ratio | 30 |
| Yield | 1.07% |
| Expense Ratio | 0.45% |
DATA SOURCE: ISHARES.
The goal of the IHE is to give investors an easy way to buy a diversified portfolio of stocks from the U.S. pharmaceutical sector. Right now the IHE holds a stake in 42 different companies, with the bulk of its assets concentrated in its top holdings.
Top 10 positions
| Company | Symbol | % Assets |
|---|---|---|
| Johnson & Johnson | JNJ | 9.53% |
| Pfizer | PFE | 8.73% |
| Merck & Co. | MRK | 7.48% |
| Bristol-Myers Squibb | BMY | 6.93% |
| Eli Lilly | LLY | 5.48% |
| Allergan | AGN | 5.39% |
| Zoetis | ZTS | 3.91% |
| Mylan NV | MYL | 3.21% |
| Jazz Pharmaceuticals | JAZZ | 2.96% |
| Anacor Pharmacetuicals | ANAC | 2.67% |
TABLE SOURCE: ISHARES.
Add them up and these 10 stocks comprise more than 52% of the funds' total assets, so when a few of these stocks perform well -- as they did this week -- the the whole fund does too.
What went right this week?
Most of this fund's top holdings ended the trading week higher, but two companies in particular -- Mylan N.V. (MYL) and Allergan PLC (AGN) -- put up standout performances.
Allergan's stock has been getting a lot of attention from billionaire investors, causing shares to soar this week. Recent filings with the SEC showed that John Paulson -- one of the world's wealthiest hedge fund managers -- made Allergan into his funds biggest position, comprising about 10.8% of its portfolio. Other billionaire investors like Third Point's Dan Loeb and Elliot Management's Paul Singer have also put a substantial portion of their fund's assets into Allergan too.
But the reason hat the stock jumped this week because billionaire investor Carl Icahn disclosed that he too has taken a big position in the Botox maker. Carl Icahn has a track record of making big positions in company's and the agitating for shareholder friendly changes to be made, so many investors blindly follow his moves, causing shares to spike this week.
Mylan NV’s stock also leapt forward this week after news broke that its biosimilar version of Roche Holding AG’s breast cancer drug Herceptin performed just as well in Phase 3 trials as the brand-name drug. That's great news since Herceptin sales each yet exceed $6 billion, giving Mylan a real chance at stealing some market share in the not too distant future if regulators give it the thumbs up.
What's next for IHE?
The IHE has now claimed the title of best performing healthcare ETF on a weekly basis for the fourth time this year, which speaks volumes about how well its strategy of investing in the pharma giants works. With a low expense ratio and a history of winning, this ETF seems like a great choice for any investors who wants more exposure to the healthcare space.
