Morningstar Rating

ETF Research and Analysis

by Robert Goldsborough
Suitability
Investors seeking broad exposure to the domestic health-care sector can consider iShares U.S. Healthcare Sector Index IYH. Given the sector's lack of economic sensitivity, investors seeking a defensive tilt for a broad   Read more 

Bull Case

The portfolio is filled with high-quality, wide-moat firms.
The health-care sector could enjoy a secular tailwind propelled by the aging population.
Several of the subindustries in this ETF have interesting opportunities ahead and should benefit from the exchanges, including the PBM space, pharmaceutical companies, and health-care providers. Read more 

Bear Case

At 0.45%, this fund's expense ratio is more than double the expense ratio of similar funds from the Vanguard and SPDR families.
The stock prices of health-care companies (drug companies 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. If the government enacts policies that reduce profitability across the health-care sector (or among drugmakers in particular), then this ETF will suffer.
This fund invests about 51% of its assets in its top-10 holdings. Thus, the portfolio's risk and valuation are strongly influenced by just a handful of large-cap stocks. Read more 

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