In this article, we will discuss the 10 best performing healthcare ETFs in 2022. If you want to explore similar ETFs, you can take a look at 5 Best Performing Healthcare ETFs in 2022.
2022 has been riddled with volatility, inflation, interest rates, and panicky investors. Investors’ focus has shifted from cyclical and growth sectors towards defensive and value sectors amid substantially high CPI prints, an aggressive Fed, and a turbulent market. Equities have had a tough year but have recently started to see a bounce-back, after a weak CPI print was reported for October. As of December 9, the S&P has shed 18% of its value year to date, the Nasdaq has dipped 30.5% since the beginning of 2022, and the Dow is down 8.50% for the year.
Investors are finding refuge in consumer defensive sectors, and particularly healthcare. On December 10, Strategas head of technical analysis, Chris Verrone, appeared in an interview on CNBC where he discussed why he thinks healthcare will be a leading sector in 2023. Healthcare is one of Chris Verrone’s “Top Ideas” as we head into the next year. The analyst noted that though “pharmaceuticals has been a dead industry for the better part of the last 5 or 6 years” the pharmaceutical stocks have started to “break out”. Verrone said that “we have seen leadership really coming from the likes of Merck & Co., Inc. (NYSE:MRK) and Bristol-Myers Squibb Company (NYSE:BMY)” and that he sees healthcare as a leading sector into 2023 and it is a “theme worth playing”.
While the sell offs in equities have shaken up investor confidence, investors can still work around gaining exposure to the much-anticipated leading sector in a less risky way. Investing in healthcare ETFs (exchange-traded funds) over healthcare stocks is a great way to gain exposure to the healthcare sector without having to pick and choose individual stocks. Healthcare ETFs can offer a diversified portfolio of healthcare companies, allowing investors to spread their risk across a range of different healthcare stocks. Healthcare ETFs are also generally more liquid than individual stocks, meaning that investors can enter or exit the market quickly and easily. This is beneficial for investors who don’t have a long-term investment horizon and are looking to take advantage of short-term market movements.
Overall, investing in healthcare ETFs over healthcare stocks is a great way for risk-averse investors to gain exposure to some of the best-in-class names in the healthcare sector, which include Johnson & Johnson (NYSE:JNJ), Pfizer Inc. (NYSE:PFE), and Moderna, Inc. (NASDAQ:MRNA). This article will look at some of the best performing healthcare ETFs in 2022.
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Our Methodology
We screened for non-leveraged and non-inverse healthcare ETFs to compile this list. We sorted these ETFs based on their year-to-date returns, as of December 8, and picked the highest returning among them. Along with each ETF, we have mentioned its portfolio breakdown, the index it tracks, and its notable holdings. Let’s now look at the best performing healthcare ETFs in 2022.
10 Best Performing Healthcare ETFs in 2022
10. iShares U.S. Healthcare Providers ETF (NYSEARCA:IHF)
YTD Return as of December 9: -4.67%
The iShares U.S. Healthcare Providers ETF (NYSEARCA:IHF) is down 4.67% for the year, outperforming the S&P 500 by roughly 13%, as of December 9. The fund is one of the best performing healthcare ETFs in 2022 and uses a representative sampling technique to mirror the performance of the Dow Jones U.S. Select Health Care Providers Index. The fund has an expense ratio of 0.39% and yields 0.59%. The fund pays out dividends on a quarterly basis.
The iShares U.S. Healthcare Providers ETF (NYSEARCA:IHF) has 74 holdings and a top ten holdings concentration of 76.52%. Among its most prominent holdings is Cigna Corporation (NYSE:CI). As of December 9, Cigna Corporation (NYSE:CI) has returned 41.81% year to date and is offering a dividend yield of 1.35%.
On November 23, Morgan Stanley analyst Erin Wright raised his price target on Cigna Corporation (NYSE:CI) to $347 from $318, after taking coverage of the name, and remained Overweight on the shares.
As of September 30, Glenview Capital is the top investor in Cigna Corporation (NYSE:CI) and has a position worth $538.27 million.
Here is what Aristotle Atlantic Partners, LLC had to say about Cigna Corporation (NYSE:CI) in its third-quarter 2022 investor letter:
“Cigna Corporation (NYSE:CI) outperformed the S&P 500 Index in the third quarter, as the company reported what we view as solid second quarter results driven by a better-than-expected medical loss ratio. The company continues to be aggressive with share repurchases and we believe the defensive nature of Cigna’s business continues to be attractive during the ongoing macroeconomic uncertainty.”
9. Fidelity MSCI Health Care Index ETF (NYSEARCA:FHLC)
YTD Return as of December 9: -4.57%
The Fidelity MSCI Health Care Index ETF (NYSEARCA:FHLC) has an expense ratio of 0.08% and a trailing twelve-month yield of 1.33%. The fund tracks the performance of the MSCI USA IMI Health Care 25/50 Index and employs a representative sampling technique. The fund has lost 4.57% year to date, as of December 9, and is among the best performing healthcare ETFs in 2022.
The Fidelity MSCI Health Care Index ETF (NYSEARCA:FHLC) has a top ten holdings concentration 47.97% and has 438 holdings. Eli Lilly and Company (NYSE:LLY) is one of the top holdings of the fund. The stock has surged 32.85% year to date, as of December 9, and is yielding 1.09%.
This December, UBS analyst Colin Bristow raised his price target on Eli Lilly and Company (NYSE:LLY) to $428 from $407 and reiterated a Buy rating on the shares.
At the close of Q3 2022, Fisher Asset Management was the dominant investor in Eli Lilly and Company (NYSE:LLY). The fund’s stakes in the company were valued at $1.26 billion.
Here is what ClearBridge Investments had to say about Eli Lilly and Company (NYSE:LLY) in its third-quarter 2022 investor letter:
“In the U.S., we initiated a position in pharmaceutical maker Eli Lilly (NYSE:LLY) as it brings out new drug candidates for diabetes and Alzheimer’s disease. New drugs impact diabetes but have also demonstrated significant weight loss for patients who are overweight and have other co-morbidity issues as a result. Lilly is one of the two key players in diabetes care and we believe the potential market opportunity is much higher than the consensus forecasts as we are seeing evidence of accelerating adoption.”
By investing in healthcare ETFs, investors can gain exposure to leading players in the space such as Johnson & Johnson (NYSE:JNJ), Pfizer Inc. (NYSE:PFE), and Moderna, Inc. (NASDAQ:MRNA).
8. iShares Global Healthcare ETF (NYSEARCA:IXJ)
YTD Return as of December 9: -3.74%
The iShares Global Healthcare ETF (NYSEARCA:IXJ) employs a representative sampling technique to mirror the returns of the S&P Global 1200 Health Care Index. As of December 9, the fund has lost 3.74% year to date and has outperformed the S&P 500 by roughly 14%. The fund is one of the best performing healthcare ETFs in 2022.
The iShares Global Healthcare ETF (NYSEARCA:IXJ) has an expense ratio of 0.40% and pays out dividends semiannually. The fund has a yield of 1.20%. The iShares Global Healthcare ETF (NYSEARCA:IXJ) has 133 holdings and a top ten holdings concentration of 41.55%. Among the fund’s top ten holdings, we have Merck & Co., Inc. (NYSE:MRK).
As of December 9, Merck & Co., Inc. (NYSE:MRK) has returned 41.51% to investors so far in 2022 and is trading at a PE multiple of 18x. On November 17, Credit Suisse analyst Trung Huynh took coverage of Merck & Co., Inc. (NYSE:MRK) with an Outperform rating and a $120 price target.
As of September 30, Ken Fisher’s Fisher Asset Management is the largest investor in Merck & Co., Inc. (NYSE:MRK) and has a position worth $1.03 billion in the company.
Here is what Chartwell Investment Partners had to say about Merck & Co., Inc. (NYSE:MRK) in its second-quarter 2022 investor letter:
“In the Dividend Equity accounts, the three best performers in Q2 includes Merck (NYSE:MRK, 3.6%), up 12.0%. Merck, like other pharma companies, is in a defensive business, but the stock also did well as peak-sales estimates for their flagship drug, Keytruda, have gone up (JPMorgan estimates $32 billion in sales by 2026).”
7. iShares U.S. Healthcare ETF (NYSEARCA:IYH)
YTD Return as of December 9: -3.60%
The iShares U.S. Healthcare ETF (NYSE:IYH) has an expense ratio of 0.39% and is yielding 1.08% on a quarterly basis. The fund makes use of a representative sampling technique to track the performance of the Russell 1000 Health Care RIC 22.5/45 Capped Index. As of December 9, the fund has fallen by 3.60% year to date, outperforming the S&P 500 by over 14%. The fund is one of the best performing healthcare ETFs in 2022.
The iShares U.S. Healthcare ETF (NYSE:IYH) has 116 holdings and a top ten holdings concentration of 53.87%. Among its top ten holdings, we have Bristol-Myers Squibb Company (NYSE:BMY). As of December 9, Bristol-Myers Squibb Company (NYSE:BMY) has gained 27.39% year to date and is offering a dividend yield of 2.74%.
On November 17, Credit Suisse analyst Trung Huynh took coverage of Bristol-Myers Squibb Company (NYSE:BMY) with a Neutral rating and a $78 price target.
At the close of Q3 2022, Pzena Investment Management was the dominant shareholder in Bristol-Myers Squibb Company (NYSE:BMY) and held stakes worth $283.8 million in the company.
Here is what RGA Investment Advisors had to say about Bristol-Myers Squibb Company (NYSE:BMY) in its third-quarter 2022 investor letter:
“Bristol-Myers Squibb Company (NYSE:BMY), which we referenced above, boasts a double digit free cash flow yield that gets divided roughly equally between repurchases, a dividend and M&A in what is the best environment for acquisitions perhaps ever. In 2019, BMY acquired Celgene, who had one of the better corporate development programs in the industry. We view this as a great outlet for us as generalists considering a company like BMY should truly thrive with the ability to acquire outstanding assets and science at depressed valuations. We touched on the Turning Point acquisition above and we expect the company to be increasingly active in the M&A landscape. Importantly, Celgene also came to BMY with a phenomenal CAR-T platform. CAR-T is a cell therapy that activates the body’s immune system to target cancers. This will be a key growth vector alongside M&A in overcoming the company’s patent cliff.”
6. Simplify Health Care ETF (NYSEARCA:PINK)
YTD Return as of December 9: -2.93%
The Simplify Health Care ETF (NYSEARCA:PINK) has lost 2.93% so far in 2022 and is placed on our list of the best performing healthcare ETFs. The fund uses a fundamental analysis with bottom-up stock picking approach to compile its portfolio. The Simplify Health Care ETF (NYSEARCA:PINK) has an expense ratio of 0.50% and is offering a dividend yield of 0.40%. The fund pays out dividends on a quarterly basis.
The Simplify Health Care ETF (NYSEARCA:PINK) has 60 holdings and a top ten holdings concentration of 49.89%. Among the fund’s top holdings we have UnitedHealth Group Inc. (NYSE:UNH). As of September 30, GQG Partners is the largest shareholder in UnitedHealth Group Inc. (NYSE:UNH) and has disclosed a position worth $1.63 billion.
This December, Credit Suisse analyst A.J. Rice raised his price target on UnitedHealth Group Inc. (NYSE:UNH) to $610 from $590 and maintained an Outperform rating on the shares. As of December 9, the stock has gained 7.35% year to date and is offering a forward dividend yield of 1.22%.
Here is what Aristotle Atlantic Partners, LLC had to say about UnitedHealth Group Incorporated (NYSE:UNH) in its third-quarter 2022 investor letter:
“UnitedHealth Group Incorporated (NYSE:UNH) is a leading U.S. health insurer offering a variety of plans and services to group and individual customers nationwide. Its health benefits segment manages health maintenance organization, preferred provider organization and point-of-service plans, as well as Medicare, Medicaid, state-funded, and supplemental vision and dental options. In addition, UnitedHealth Group’s Optum health services units—OptumHealth, OptumInsight and OptumRx—provide wellness and care management programs, financial services, information technology solutions, and pharmacy benefit management services to individuals and the health care industry. We believe UnitedHealth Group is well-positioned as a leader in commercial and government insurance markets with a broad complimentary service offering through Optum Health. As one of the largest health care payers and providers, we believe the company has unique insights and scale to continue to evolve the health care delivery process and drive above industry profitability and growth. We believe UnitedHealth Group’s track record of financial strength and stability warrants a premium in share valuation.”
Some of the major players in the global healthcare industry include UnitedHealth Group Incorporated (NYSE:UNH), Johnson & Johnson (NYSE:JNJ), Pfizer Inc. (NYSE:PFE), and Moderna, Inc. (NASDAQ:MRNA).
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Disclosure: None. 10 Best Performing Healthcare ETFs in 2022 is originally published on Insider Monkey.
