iShares U.S. Pharmaceuticals ETF: Favorable Long-Term Growth Outlook Should Drive Future Price Appreciation

ETF Overview

iShares U.S. Pharmaceuticals ETF (IHE) owns a portfolio of large-cap pharmaceutical stocks. The ETF tracks the investment results of the Dow Jones U.S. Select Pharmaceuticals Index. Stocks in IHE’s portfolio are stocks with competitive advantages over their smaller peers. In addition, these stocks will benefit from rising pharmaceuticals demand in the world. IHE’s stocks are fairly valued against their historical averages. Given the favorable long-term growth outlook, we believe the fund is a good choice for investors with a long-term investment horizon.

Data by YCharts

ETF Analysis

Stocks in IHE’s portfolio are moaty stocks with competitive advantages

Many pharmaceutical stocks hold valuable intangible assets from drug patents. This is also where they build their moats. These companies do have a rich drug development pipelines that should add more drug patents in the future. This will help these companies to remain competitive once their existing patents expire. In addition, stocks in IHE’s portfolio are generally recession resilient as people will still need medicine regardless of an economic recession or not.

Top 10 Holdings

Morningstar Moat Status

Weight (%)

Johnson & Johnson (JNJ)

Wide

22.1

Merck & Co (MRK)

Wide

19.47

Eli Lilly (LLY)

Wide

4.74

Zoetis Inc. Class A (ZTS)

Wide

4.66

Allergan (AGN)

Wide

4.44

Pfizer (PFE)

Wide

4.40

Bristol Myers Squibb (BMY)

Wide

4.36

Mylan NV (MYL)

None

4.26

Elanco Animal Health (ELAN)

N/A

4.25

Jazz Pharmaceuticals (JAZZ)

None

3.26

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