It's easy to be blinded by headline numbers. The rally in biotech isn't so simple.
With the Ebola crisis on everyone's minds, a lot of folks have been writing rather hyperbolic headlines like "Ebola Economics." And it's easy to understand why. While the broad health care sector isn't strictly the highest-performing large-cap sector in the U.S., it's darn close.
Here's how I'd tally up the broad sector returns for the year so far (through Oct. 28, 2014):
| Sector | Broad Market Ticker |
YTD Total Return |
| Real Estate | IYR | 20.89% |
| Utilities | XLU | 20.06% |
| Health Care | XLV | 19.01% |
| Tech | XLK | 11.40% |
| Cons. Non Cycl. | XLP | 9.12% |
| Financial | XLF | 7.14% |
| Industrial | XLI | 4.24% |
| Basic Materials | XLB | 3.77% |
| Telecom | IYZ | 0.62% |
| Cons. Cycl | XLY | 0.44% |
| Energy | XLE | -3.86% |
Health care's not tops, but like I said, pretty close, and a lot of those gains have come just in the last two weeks.
But unfortunately, health care is the single-most-classic case of ETFs not being equal, so much so that I regularly use a performance chart of health care ETFs to illustrate how important digging into what the "Fit" score in an ETF is.
Consider why XLV is up. It's not the 7 percent position in Pfizer (down 2.7 percent this year) or the holdings of Express Scripts (2.3 percent of the portfolio, up 4.33 percent) that are making it a contender. It's Gilead, up 50 percent so far this year, and Allergan (up 64 percent) and Amgen (up 32 percent).
In other words, the story in "health care" isn't about "health care" at all—it's about biotech—companies out there on the bleeding edge of medical science. And biotech ETFs have had a wild, wild ride this year:
