Vanguard Health Care ETFVHT

Morningstar Rating

ETF Research and Analysis

by Robert Goldsborough

Suitability
Vanguard Health Care ETF VHT offers investors exposure to a high-quality portfolio of health-care companies, ranging from pharmaceuticals to medical devices. Given the sector's lack of sensitivity to the overall economic Read more

Bull Case

The pharmaceutical industry could enjoy a secular tailwind propelled by the aging population.

The portfolio is filled with high-quality, wide-moat firms. Some 83% of the assets in this ETF are invested in companies with economic moats, which Morningstar's equity analysts define as competitive advantages.

Given litigation worries in the health-care sector, an ETF is an effective vehicle for diversifying away much of the company-specific risk. Read more

Bear Case

Health-care stock prices, drug stocks in particular, can be very sensitive to the notion of increased governmental regulation of prices. Tackling the rising cost 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.

The fund keeps much of its assets in pharmaceutical stocks, meaning it's heavily leveraged to that industry's unique risks, such as patent expirations, generic competition, and government regulation. Read more