Health Care Select Sector SPDRXLV

Morningstar Rating

ETF Research and Analysis

by Robert Goldsborough

Suitability
Investors seeking high-quality North American health-care companies can consider Health Care Select Sector SPDR XLV. Given the sector's lack of economic sensitivity, investors seeking a defensive tilt for a broad portfolio Read more

Bull Case

Among health-care ETFs, this fund is a strong choice. Its expense ratio is just 0.18%, and its portfolio is chock-full of high-quality, wide-moat firms.

Portfolio-construction rules are simple and result in very low turnover.

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, and 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.

There's no question that efforts toward greater regulation will continue.

Thanks to its heavy concentration, the fund is heavily leveraged to the pharmaceutical industry's unique risks, such as patent expirations, generic competition, and government regulation. Read more