ETF Research and Analysis
by John GabrielSuitability
PowerShares Dynamic Biotech & Genome PBE might fit the bill for investors seeking to add some biotechnology exposure to their portfolios. Due to the highly specialized and targeted nature of this industry ETF, investors should only Read more
PowerShares Dynamic Biotech & Genome PBE might fit the bill for investors seeking to add some biotechnology exposure to their portfolios. Due to the highly specialized and targeted nature of this industry ETF, investors should only Read more
Bull Case
The quantitative model driving this ETF led portfolio managers to add Human Genome Sciences HGSI to the fund in June 2009--just in time to capture an explosive 760% move in the stock. (The fund has since rebalanced.)
Savvy stock-picking by the fund's quant model has helped it trounce the returns posted by rivals IBB and XBI thus far in 2009. Year-to-date through Oct. 12, 2009, PBE has risen more than 23.5%, versus returns of 12% for IBB and negative 5% for XBI.
Over the past three years, this fund has displayed 80% correlation with the broader health-care sector, as defined by Health Care Select Sector SPDR XLV. Moreover, it sported just 73% correlation with the S&P 500 Index over the same period. Read more
Bear Case
This fund's portfolio turns over frequently (by ETF standards, at least), which increases the risk for capital gains distribution in the future, though there haven't been any yet.
While upstart names are unavoidable in a speculative sector like biotech, they spur high volatility. This ETF's gains can vanish as quickly as they arrive.
Many of this fund's holdings lack competitive advantages of any kind, as they're founded on boom/bust business models that hinge on the successful development, approval, and marketing of unproven drug therapies. Read more
The Best ETF Sector Idea for 2010
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