Morningstar Rating

ETF Research and Analysis

by Robert Goldsborough
Investors seeking exposure to the highly uncertain but potentially attractive prospects of the biotech industry can consider adding First Trust NYSE Arca Biotech Index FBT to their portfolios as a tactical satellite position   Read more 

Bull Case

Owning a basket of biotechs diffuses firm-specific risk, thereby allowing investors to gain access to this corner of the market without the headache of trying to accurately forecast the timing and size of future cash flows, which may never actually come to fruition.
Health-care reform is resulting in greater patient volumes.
Biotech firms are less vulnerable to generic competition than pharmaceutical firms because of the difficulty of manufacturing, the cost of clinical trials, and the still-developing pathway for these products in the United States. Read more 

Bear Case

Higher rebates already are in place for Medicaid patients, which are bad for biotechs because they mean biotechs see lower net prices for their drugs.
This is one of the more expensive biotech ETFs. SPDR S&P Biotech and Market Vectors Biotech ETF both cost only 0.35% per annum.
This ETF is very concentrated, so outsize performance from a small number of holdings can have a significant impact on the fund's performance. Read more 

Why Index Construction Matters for ETF Investors 
Watch more 

Premium Membership

View all of our analyst reports with a free trial to Premium.