Morningstar Rating

ETF Research and Analysis

by Robert Goldsborough
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 0.16%, and its portfolio is chock-full of high-quality, wide-moat firms.
Our equity analysts expect health-care spending in China to grow meaningfully during the next five to 10 years as China ages and becomes richer.
The health-care sector could enjoy a secular tailwind propelled by the aging population. 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 expense of health care is increasingly a priority for politicians, and if the government enacts new policies that reduce profitability across the health-care sector, this ETF will suffer.
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.
The health sector has had a cloud over it from sequestration and also from problems in Europe. Read more 

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