Morningstar Rating

ETF Research and Analysis

by Robert Goldsborough
Suitability
First Trust Health Care AlphaDEX FXH should be treated as a complementary satellite holding to a diversified portfolio. This exchange-traded fund holds a portfolio of 76 health-care stocks.
Unlike most passive funds, which   Read more 

Bull Case

This ETF offers much more of a mid-cap tilt than other health-care ETFs. As such, we believe it provides purer exposure to the U.S. health-care sector than do some of its peers, whose holdings include large-cap pharmaceutical companies with meaningful overseas businesses.
Given litigation worries in the health-care sector, an ETF is an effective vehicle for diversifying away much of the company-specific risk.
The health-care exchanges are expected to provide modest benefits at a minimum to several important health-care subsectors, including pharmaceutical firms, health-care providers, MCOs, and PBMs. Read more 

Bear Case

The defensive nature of the businesses included in this ETF may mitigate the downside in a severe economic downturn, but that doesn't mean investors won't experience periods of negative returns.
Health-care stock prices, drug stocks in particular, can be very sensitive to the notion of increased governmental regulation of prices. Tackling the rising expense of health care is increasingly a priority for politicians.
The health-care sector is exposed to large systematic risks related to government policy. If the government enacts policies that reduce profitability across the health-care sector (or among drugmakers in particular), this ETF will suffer. Read more 

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