Pharmaceuticals, much like other biotech names, have had an impressive run since the market crash. PJP uses a quant-driven methodology to select and weight pharmaceutical companies based on fundamental and risk factors for a portfolio mix that not only tends to tilt toward mid- and smaller-cap names in the segment, but also offers exposure to biotech.
This multifactor mix has delivered outsized gains relative to competing funds such as the SPDR S&P Pharmaceuticals (XPH | A-36), and even the broad segment of health care, as evidenced by the Health Care Select SPDR (XLV | A-93) in the chart below.
PJP is the most expensive fund in this segment, with an expense ratio of 0.56% and an average trading spread of 0.09%, but because of the fund’s methodology and attempt to beat the market, it remains an investor favorite. PJP has $1.2 billion in assets compared to XPH’s $487 million and the iShares U.S. Pharmaceuticals (IHE | A-63)’s $692 million.
PowerShares Nasdaq Internet (PNQI | A-61) is up 435%
PNQI invests in a broad range of the most liquid U.S.-listed Internet companies—there are currently about 90 names in the portfolio.
The fund tries to minimize single-stock risk by capping the five biggest companies at 8% and the remaining securities at 4%. Launched in June 2008, PNQI has rallied some 435% in seven years as tech stocks surged.
Since the market bottomed, the U.S. tech sector was the fourth-best-performing out of the S&P 500 sectors, with gains of more than 245%.
PNQI is a U.S. tech fund, but it also includes global Internet companies that have U.S. listings, such as China's Baidu. In fact, from a country composition, China represents about 15% of the overall portfolio—the U.S. snags about 81% of the mix.
The $260 million fund costs 0.60% in expense ratio, which is in line with competing funds, but it trades with a relatively wide average spread of 0.18%, putting total cost of ownership at about $78 per $10,000 invested a year.
The chart below shows PNQI’s rise compared with the competing $3 billion First Trust Dow Jones Internet (FDN | B-59)—the most popular in this segment—and the $20 million PowerShares Dynamic Networking (PXQ | C-19):
Charts courtesy of Stockcharts.com
Contact Cinthia Murphy at [email protected].