Designed to provide broad exposure to the Health Care ETFs category of the market, the SPDR S&P Health Care Equipment ETF (XHE) is a smart beta exchange traded fund launched on 01/26/2011.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
However, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
Even though this space provides many choices to investors–think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting–not all have been able to deliver first-rate results.
Fund Sponsors & Index
The fund is managed by State Street Global Advisors, and has been able to amass over $552.15 million, which makes it one of the average sized ETFs in the Health Care ETFs. Before fees and expenses, this particular fund seeks to match the performance of the S&P Health Care Equipment Select Industry Index.
The S&P Health Care Equipment Select Industry Index represents the health care equipment segment of the S&P Total Market Index.
Cost & Other Expenses
Investors should also pay attention to an ETF’s expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Operating expenses on an annual basis are 0.35% for XHE, making it one of the least expensive products in the space.
It’s 12-month trailing dividend yield comes in at 0.02%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund’s holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
For XHE, it has the heaviest allocation in the Healthcare sector –about 100% of the portfolio.
Looking at individual holdings, Heska Corporation (HSKA) accounts for about 1.90% of total assets, followed by Shockwave Medical Inc. (SWAV) and Irhythm Technologies Inc. (IRTC).
The top 10 holdings account for about 16.08% of total assets under management.
Performance and Risk
So far this year, XHE has gained about 7.39%, and is up about 19.01% in the last one year (as of 06/15/2023). During this past 52-week period, the fund has traded between $79.20 and $104.05.
The ETF has a beta of 0.94 and a standard deviation of 25.68% for the trailing three-year period, making it a medium risk choice in the space. With about 82 holdings, it effectively diversifies company-specific risks.
Alternatives
The SPDR S&P Health Care Equipment ETF is an excellent option for investors seeking to outperform the Health Care ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
First Trust Indxx Medical Devices ETF (MDEV) tracks INDXX GLOBAL MEDICAL EQUIPMENT INDEX and the iShares US Medical Devices ETF (IHI) tracks Dow Jones US Select Medical Equipment Index. First Trust Indxx Medical Devices ETF has $2.05 million in assets, iShares US Medical Devices ETF has $6 billion. MDEV has an expense ratio of 0.70% and IHI charges 0.39%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Health Care ETFs.
bottom line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on the latest developments in the ETF investing universe, please visit the Zacks ETF Center.
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SPDR S&P Health Care Equipment ETF (XHE): ETF Research Reports
iShares US Medical Devices ETF (IHI): ETF Research Reports
iRhythm Technologies (IRTC) : Free Stock Analysis Report
ShockWave Medical, Inc. (SWAV) : Free Stock Analysis Report
First Trust Indxx Medical Devices ETF (MDEV): ETF Research Reports
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