Williamstown, MA, September 12, 2008 --(PR.com
)-- ETF Momentum Tracker
(http://www.fidelityadviser.com/readMe_ETF.asp) announced today that healthcare ETFs have jumped in the publication’s Sector Momentum Rankings—now comprising five out of the top eight positions. The ETF Momentum Tracker Portfolio currently includes both iShares NASDAQ Biotech and iShares Medical Devices.
In an interview today, Don Dion, publisher of ETF Momentum Tracker, discussed the recent surge in healthcare ETFs—particularly the performance of iShares Dow Jones Pharmaceuticals, which currently holds the no. 4 spot on the Sector Momentum Table.
(http://www.fidelityadviser.com/readMe_ETF.asp) While Dion does not discount the incredible run sustained by the sector, he still suggests a measure of caution when purchasing pharmaceuticals.
“Pharmaceuticals have been buoyed by some consolidation and seen as a safe haven in an uncertain market,” Dion noted, “healthcare stocks rallied hard in July and held their momentum into August.” The sector cooled some during the last few weeks, but the S&P 500 healthcare companies were still up more than 1% for three months (through Sept. 5), while the index as a whole fell nearly 13%.
“Despite the run-up there are numerous reasons to be pessimistic about the pharmaceutical industry,” Dion said, “including pharma firms facing the ongoing challenge of patent expirations and competition from generic drug makers; an increasingly stringent regulatory process; and the potential of a post-election healthcare overhaul that could reduce the industry’s profits.”
In addition to the risks associated with sector-wide events, Dion also commented on the particular risks associated with an ETF like IHE, “Single-stock risk is an important consideration in a fund where the top 10 holdings account for more than half of assets.” IHE’s eighth largest holding—Schering-Plough—plunged 12% on July 21 after rallying 35% in the prior three months. “The concentrated nature of IHE’s portfolio hurt investors this month when Schering-Plough dropped because of Vytorin,” Dion said, “and IHE’s fourth largest holding—Merck—has also suffered.”
Weighing these factors, Dion has not included IHE in his model portfolio—yet. “iShares’ biotechnology and medical devices funds, No. 1 and No. 2 in our rankings, currently included in the ETF Momentum Tracker portfolio,” Dion said, “so it’s unlikely that we’ll add IHE anytime soon, to avoid overexposure.”
While Dion is watching IHE from the sidelines, he still believes that this ETF may be appropriate for investors. “Demographic trends, the product pipelines of some major drug companies, and expanding international markets could hold promise for IHE and could make it a good niche play for risk-tolerant growth investors,” Dion concluded.
ETF Momentum Tracker is a member of Fidelity Independent Adviser’s family of financial publications (http://fidelityadviser.com/). With more than 70,000 subscribers in the United States and 29 other countries, Fidelity Independent Adviser publishes four monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser (http://store.fidelityindependentadviser.com/fidinadnew.html), has been published monthly for 11 years and reaches 40,000 subscribers.
Publisher Don Dion is also president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Massachusetts, Dion Money Management manages more than $700 million in assets for clients in 49 states and 11 countries. A licensed attorney in Massachusetts and Maine, Mr. Dion has more than 25 years’ experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.