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What Does 2016 Hold In Store For Pharma ETFs

The pharma sector has been in the middle of a controversy, with questions being raised about the high prices of drugs. Democratic presidential frontrunner Hillary Clinton’s “price gouging” tweet triggered a slide in healthcare stocks in September. While there have always been concerns regarding the pricing and affordability of prescription drugs, the issue is back in focus following a 5000% price hike implemented by Turing Pharmaceuticals for Daraprim (pyrimethamine) that was approved by the FDA way back in 1953. (Read: 16 Bold ETF Predictions for 2016 ) Other companies like Valeant (NYSE: VRX ) are also under review for significantly hiking the prices of acquired drugs. Irrespective of who wins the presidential race, drug pricing will remain a topic of discussion among policymakers, the media and the general public. Meanwhile, mergers, acquisitions and deals continue to take center stage in the pharma sector. While 2014 turned out to be one of the most active years in the pharma sector where mergers and acquisitions (M&As) and licensing agreements are concerned, the trend continued this year as well. Small bolt-on acquisitions, in-licensing activities and collaborations for the development of pipeline candidates will also continue especially in therapeutic areas like central nervous system disorders, diabetes and immunology/inflammation. The hepatitis C virus market is also attracting a lot of attention. (Read: Top Sectors of 2016 and Their Leading ETFs ) Another lucrative area is immuno-oncology as these therapies have the potential to change the treatment paradigm for cancer — they basically use the natural capability of the patient’s own immune system to fight the cancer. Major players in this field include Bristol-Myers (NYSE: BMY ), AstraZeneca (NYSE: AZN ), Merck (NYSE: MRK ) and Roche. Deals targeting immuno-oncology are being inked by companies like Pfizer (NYSE: PFE ), Merck KGaA ( OTCPK:MKGAY ), Bristol-Myers, AstraZeneca and Incyte (NASDAQ: INCY ). Another trend being witnessed is the divestment of non-core business segments. Companies like Pfizer, UCB ( OTCPK:UCBJY ), Novartis (NYSE: NVS ), Glaxo (NYSE: GSK ) and AstraZeneca have all been a part of this trend. The monetization of non-core assets allows these companies to focus on their areas of expertise. Restructuring activities are also gaining momentum as large pharma companies are looking to cut costs and streamline their operations. Most of these companies are re-evaluating their pipelines and discontinuing programs which do not have a favorable risk-benefit profile. Swapping of businesses is another activity that could pick pace in 2016. Biosimilars are also a focus area. Pfizer’s acquisition of Hospira gives it a strong position in the biosimilars market. Companies like Merck and Novartis are involved in the development of biosimilars as well – in fact, Novartis’ Sandoz was the first company to launch a biosimilar in the U.S. New products are steadily gaining traction and contributing significantly to sales and so far in 2015, the FDA has approved 43 new molecular entities (NMEs) and biological products. Some of the important new product approvals this year include Vertex’s cystic fibrosis treatment, Orkambi, Pfizer’s cancer treatment, Ibrance, Novartis’ psoriasis treatment, Cosentyx, PCSK9 inhibitors – Amgen’s (NASDAQ: AMGN ) Repatha and Sanofi (NYSE: SNY )/Regeneron’s (NASDAQ: REGN ) Praluent, Roche’s advanced melanoma treatment, Cotellic and Gilead’s (NASDAQ: GILD ) Genvoya (HIV). Pharma ETFs in Focus Highlighted below are some pharma ETFs – ETFs present a low-cost and convenient way to get a diversified exposure to the sector. PowerShares Dynamic Pharmaceuticals Portfolio ETF (NYSEARCA: PJP ) PJP, launched in Jun 2005 by Invesco PowerShares, tracks the Dynamic Pharmaceuticals Intellidex Index. The fund covers health care stocks. The top 3 holdings include Bristol-Myers Squibb (5.22%), Eli Lilly & Co. (NYSE: LLY ) (5.16%) and Johnson & Johnson (NYSE: JNJ ) (5.13%). The total assets of the fund as of Dec 15, 2015 were $1,691.5 million representing 23 holdings. The fund’s expense ratio is 0.56% while dividend yield is 0.47%. The trading volume is roughly 135,985 shares per day. SPDR S&P Pharmaceuticals ETF (NYSEARCA: XPH ) XPH, launched in Jun 2006, tracks the S&P Pharmaceuticals Select Industry Index. This ETF primarily covers pharma stocks (99.39%) with the top 3 holdings being Intra-Cellular Therapies, Inc. ( OTCQB:ITCI ) (4.84%), Nektar Therapeutics (NASDAQ: NKTR ) (3.69%), and Bristol-Myers Squibb (3.44%). Total assets as of Dec 15, 2015 were $695.6 million representing 41 holdings. The fund’s expense ratio is 0.35% and dividend yield is 0.71%. The trading volume is roughly 65,529 shares per day. iShares U.S. Pharmaceuticals ETF (NYSEARCA: IHE ) IHE, launched in May 2006, seeks investment results that correspond generally to the price and yield performance of the Dow Jones U.S. Select Pharmaceuticals Index. The fund mainly consists of pharma companies (87%). Biotech companies account for about 10.6% of the fund. The top 3 holdings of this fund are Johnson & Johnson (10.79%), Pfizer (8.70%) and Bristol-Myers Squibb (7.84%). The total assets of the fund as of Dec 16, 2015 were $890.45 million representing 43 holdings. The fund’s expense ratio is 0.45% with the dividend yield being 0.89%. The trading volume is roughly 28,951 shares per day. Market Vectors Pharmaceutical ETF (NYSEARCA: PPH ) PPH was launched in Dec 2011 and tracks the Market Vectors U.S. Listed Pharmaceutical 25 Index. The top 3 holdings of this fund are large-cap pharma companies – Johnson & Johnson (7.97%), Novartis (7.02%) and Bristol-Myers Squibb (5.55%). The total assets as of Dec 16, 2015 were $335.9 million representing 26 holdings. While the expense ratio is 0.35%, dividend yield is 2.04%. The trading volume is roughly 72,694 shares per day. Conclusion While EU austerity measures, negative currency impact and pricing pressure remain headwinds, the pharma industry is out of the worst of its genericization phase. Many companies, which had faced generic headwinds in the last couple of years, should continue to see a sustained improvement in results this year. Cost-cutting, downsizing, emerging markets and new products should support growth. Increased pipeline visibility and appropriate utilization of cash should increase confidence in the sector. Link to the original article on Zacks.com

5 Very Successful ETF Launches Of 2015

The year 2015 turned out to be a momentous one for the ETF industry with assets comfortably crossing the $2 trillion mark. About 287 ETFs have been launched so far this year (with nine more days to go) compared with about 180 ETF initiations in 2014, 150 in 2013 and 168 rollouts in 2012. All these have tallied to 1,839 ETFs so far. Not only this, a considerable number of ETFs are in the pipeline, pointing to growing investor interest for exchange-traded products in this market. The credit goes mainly to a wide range of innovative and fresh-themed products in the space, which hold investors’ attention despite the peaks and troughs of the market. Among the new products, active funds, smart-beta ETFs, high yield options and hedged international products were appreciated by investors. Below are five ETFs launched in 2015 that scooped up assets within a short time span on the market, and look to be big winners for their issuers down the road: SPDR DoubleLine Total Return Tactical ETF (NYSEARCA: TOTL ) Making its debut in late February in association with bond master Jeffrey Gundlach’s DoubleLine Capital, this SPDR actively managed bond ETF has amassed about $1.73 billion, which is a tall order for any player in the ETF industry (read: 2 New ETFs with Big Potential ). Retail investors seem to revere the name of the fixed income veteran Jeff Gundlach whose team manages the ETF. TOTL looks to maximize total return, while emphasizing income by investing in a global portfolio of fixed income securities of various maturities and ratings, though only 10% of the portfolio goes to the international arena. The fund puts about 58% of assets in mortgage-backed securities followed by about 9% invested in treasuries and 8.4% in emerging markets. The fund charges 55 bps in fees and is down 2.5% since inception (as of December 22, 2015). SPDR S&P North American Natural Resources ETF (NYSEARCA: NANR ) This ETF has scooped up about $662.6 million in assets within just a few days of its launch this month itself. The fund looks to track the performance of publicly traded large- and mid-cap US and Canadian companies in the natural resources and commodities businesses including energy, materials or agriculture. This 59-stock fund charges 35 bps in fees. Though the fund is revolving around some presently beaten-down areas of the investing world, investors might have been placing their money to cash in on the undervalued status over the long run. iShares Exponential Tech ETF (NYSEARCA: XT ) This ETF has attracted almost $640.5 million in assets since its inception in March. It looks to track the Morningstar Exponential Technologies Index that considers developed and emerging market companies which create or use exponential technologies, per the prospectus . Exponential technologies replace outdated technologies, foray into underpenetrated markets and have the ability to influence the economy (read: Why Is This New ETF Growing So Fast? ). Big data and analytics, nanotechnology, medicine and neuroscience, networks and computer systems are some the areas under exponential technologies that the fund uses. The product charges 47 basis points in annual expenses, which is quite rational given its niche theme. However, the fund is down 4.2% so far this year (as of December 22, 2015). Goldman Sachs Active-Beta Emerging Market ETF (NYSEARCA: GEM ) The fund looks to deliver exposure to emerging market equities and picks stocks based on four attributes of performance, namely good value, strong momentum, high quality and low volatility. Given the potential turmoil in the emerging market bloc due to the Fed lift-off, political issues in some countries and slumping commodities, the active beta approach drew investors’ attention. The 434-stock fund has amassed about $570 million so far and charges 45 bps in fees. The fund has heavy focus on the financial sector with about 25.6% followed by Information Technology (18.7%), Consumer Staples (14.1%) and Consumer Discretionary (10.8%). SPDR Russell 1000 Momentum Focus ETF (NYSEARCA: ONEO ) This new ETF has amassed about $335.1 million in assets in less than a month. The fund looks to track the performance of a segment of large-capitalization U.S. equity securities demonstrating a combination of core factors with a focus factor comprising high momentum characteristics. This 918-stock ETF is heavy on Consumer Discretionary (20.05%) followed by Financial Services (16.84%) and Producer Durables (16.37%). The fund charges 20 bps in fees. Link to the original article on Zacks.com

7 Ways To Gauge Growth And Evaluate Value

Growth and value are cornerstones of fundamental analysis. Here we explore some of the most popular methods of gauging a company’s growth and a stock’s value. “Growth” and “value” are thought of as two very significant metrics in the world of fundamental analysis , two things that can cause a trader to buy, sell, or ignore. But what is growth? And what is value? These are words we hear and read every day, and that most people think they can easily define. You might think that a musician’s songwriting has grown, or you might give (or get) what you believe to be valuable advice. But in both of these instances, growth and value are subjective-matters of perception. But when it comes to the markets, growth and value are not so subjective. Rather, they are things that, for the most part, can be measured or weighed. Growth refers to a company’s performance, whereas value applies to its stock price. Moreover, there are very specific ways of gauging growth and value. Here we’ll discuss seven popular ways of doing just that. GROWTH: Past, Present, and Future. In simple terms, growth describes earnings. There are three different ways of looking at those earnings: past, present, and future. 1. The Past: Historical Growth As the common disclaimer goes, “past performance is not indicative of future results.” And as true as that may be, it doesn’t mean that it’s not good to know a company’s past. With that in mind, many traders and investors look at a company’s historical growth, which is really just a catchy way of describing the company’s annualized earnings in the past. When there exists a consistent increase in annualized earnings, there exists historical growth. 2. The Present: Free Cash Flow When it comes to measuring growth (or growth potential), some traders and investors like to follow the cash or, more specifically, the free cash flow. Free cash flow is, put simply, the difference between cash in and cash out. When there’s significantly more cash coming in, the free cash flow is strong. When the cash coming in is close to (or less than) the cash going out, the free cash flow is weak. Companies with strong free cash flow may have capital for R&D, acquisitions, etc. In other words, things that may very well help it grow. 3. The Future: Projected Growth If you’re going to look back, you may also want to look ahead. But where a company’s historical growth can be calculated by looking at their past performance data, a company’s projected growth is determined by analysts who look at a variety of information, including a company’s current and recent finances, as well as its stated objectives and outlooks. VALUE: Price Comparisons Growth places a heavy emphasis on, of course, growing. Value, however, does not. (After all, not every company aims to keep expanding, or even growing, its earnings. Some companies, whether they want to or not, just stay relatively consistent.) Value looks at the price of the company’s stock relative to the performance of the company, regardless of whether or not the performance is improving. Here are four popular ways of gauging the value of a stock. 1. Price to Earnings Ratio (P/E) This metric takes the stock’s price and compares it to the company’s earnings. It does that by dividing the stock price by the earnings per share (EPS). A “normal” P/E ratio is typically 20-25 times higher than the EPS. So a stock with a “normal” P/E ratio may be trading at $20/share, and have an EPS of $1/share. In this case, the P/E ratio is 20. Perhaps you can see where this is going: If a company is earning more money per share, but it’s not reflected in the stock price, the P/E ratio can be low (lower than 20), and this can suggest that a stock is undervalued (and thus, may be a good buy). For example, remember the example stock that was trading at $20? Now, let’s say its EPS is $5. The P/E ratio for that stock would be 4, which may suggest the stock price should go up to reach normal range. Or, consider the reverse: the stock is trading at $20, but the company is only earning $0.50/share. Now it has a P/E ratio of 40, which suggests the stock may be overvalued. 2. Price to Book Ratio (P/BV) To arrive at this measurement, you have to consider a hypothetical, which is to say, you have to know its book value. A company’s book value is the theoretical amount that every share would be worth if the company were to be completely liquidated. That number is then compared to the actual share price of the company. The result is the P/BV, or Price to Book Ratio. If the ratio is low (meaning the price is lower than the book value), the stock may be undervalued. 3. Price to Sales Ratio (P/S) How does a company make money? One major way is by selling, some in a traditional retail sense, and others in a more abstract sense (by selling its ideas or services). Regardless, since sales are often a significant source of money for a company, many traders and investors like to compare a company’s sales to its stock price. Here they do this by actually breaking down the sales to a per-share amount. With this figure, they formulate the Price to Sales Ratio. Like the above two ratios, a comparatively low stock price means a low ratio, which may be indicative of an undervalued stock. 4. Dividend Yield and Historical Rate of Dividend Growth Since dividends are cash payouts that companies pay their shareholders, dividends can be an important thing to many traders and investors. For one thing, dividends can allow a shareholder to earn income without actually selling the stock. And for another, the amount of dividends can be a good indicator of the health of the company. To take a deeper look, many users of fundamental analysis will look at a company’s dividend payment history. Consistent and increasing dividends may be a sign of a strong company, and a stock price that has not grown along with those dividends may be a sign of an undervalued stock. So, in the end, when you think about growth and value, think about these seven points. For growth, there’s the past, the present, and the future. And when it comes to value, do price comparisons-against earnings, against book value, against sales, and against dividend yields. Disclosures Schwab does not recommend the use of technical analysis as a sole means of investment research. The information here is for general informational purposes only and should not be considered an individualized recommendation or endorsement of any particular security, chart pattern or investment strategy. Past performance is no guarantee of future results. ©2015 Charles Schwab & Co., Inc. ( Member SIPC ) All rights reserved. (0614-4161)