ETF Trader - 4 x Heathcare ETFs on the ASX
With the ageing population of developed nations, global health care is a popular thematic . Add in the CV19 pandemic that has seen heightened interest in this sector, expedited vaccine trials and ramped-up government spending, there's little wonder the sector has performed well over the last few years.
In Australia we've had the trouble of highly concentrated domestic exposure through some ASX-listed world leaders such as CSL, Sonic Health Care (SHL) and Cochlear (COH). The challenge to get broader healthcare exposure has been difficult on the ASX, with three options, recently increased to four.
The two main options in Australia for global Healthcare exposure were Betashare's DRUG - the hedged option, and Ishares's Global Healthcare ETF - IXJ which is S&P 500 focused. IXJ tracks an index that captures 1,200 Global Healthcare leaders through the S&P Global 1200 Healthcare Sector Index.
We looked at the two in detail here. In summary, DRUG's benefits and downsides are that is it hedged in Australian dollars. IXJ's downside is that it's market-cap weighted. The standard problem with market cap indices is that they are highly concentrated in the top end and poorly represented with the high growth names at the lower end.
CURE is the third option. If Australian investors want a more targeted approach to Healthcare in the bio tech space, then there is this ETFS's BIO tech that tracks the performance of the S&P Biotechnology Select Industry Index. Holdings within this ETF are equally weighted to provide a more diversified approach - without fundamental filters.
The recently added fourth option on the ASX is Van Eck's HLTH, which looks at global healthcare universe and applies fundamental filters that cover growth, value, profitability and cash flow. These are standard metrics that fund managers across the globe scan for. This type of filtering often weeds out the most speculative companies and reduces the exposure to the dominant large caps that fill up the top end of the global indices.
HLTH rates the companies and the ETF invests in the top 50 from that list. While diversified, it's not as diversified as IXJ, but concentrated to the quality names. The net result is a basket with companies holding an average:
- PE of 38 v 42
- ROE 31 / 24 - historic sales growth of 37/8 and
- EPS growth of 102 / 18.
As the number of ETFs on the ASX grows, we have extra tools to work with in the Healthcare space. It seems as though we're getting more targeted approaches to ASX-based global diversification to help pinpoint a portfolio's exposure.