ETFs Holding Guns, Opioids & Prisons

June 22, 2018

ETFs Holding Opioid Stocks

Dozens of public companies are involved in the manufacture and distribution of opioids, though state lawsuits have most often targeted eight specific companies as the instigators of the opioid crisis. These include:

  • Purdue Pharmaceuticals, which is a private company
  • Teva Pharmaceutical Industries (for which no ownership data was available, likely because it trades as an ADR)
  • Allergan (AGN)
  • Endo International (ENDP)
  • Johnson & Johnson (JNJ)
  • AmerisourceBergen Corp (ABC)
  • Cardinal Health (CAH)
  • McKesson Corp (MCK)

There are 319 ETFs with at least one of these six public opioid manufacturer and distributor companies in their portfolio. Below are the 10 with the highest percentage weighting to opioid stocks:

 

10 ETFs With Highest Weighting In Opioid Stocks
Ticker Fund Allocation Weight Combined Market Value ($M) Which Stock(s)?
IHE iShares U.S. Pharmaceuticals ETF 16.53% 62.79 ENDP, AGN, JNJ
PPH VanEck Vectors Pharmaceutical ETF 14.15% 40.58 ENDP, ABC, MCK, JNJ
XLV Health Care Select Sector SPDR Fund 13.47% 2164.76 ABC, CAH, MCK, AGN, JNJ
XPH SPDR S&P Pharmaceuticals ETF 12.43% 43.34 JNJ, ENDP, AGN
IYH iShares U.S. Healthcare ETF 11.80% 224.02 ENDP, MCK, AGN, JNJ
FHLC Fidelity MSCI Health Care Index ETF 11.50% 136.03 All 6
VHT Vanguard Health Care ETF 11.27% 818.41 All 6
PJP Invesco Dynamic Pharmeceuticals ETF 11.25% 62.51 AGN, ENDP, JNJ
FTXH First Trust Nasdaq Pharmaceuticals ETF 11.18% 0.37 AGN, ENDP, JNJ
RXL ProShares Ultra Health Care 10.84% 11.69 ENDP, MCK, AGN, JNJ

 

Unsurprisingly, all of these ETFs with the highest weighting in opioid stocks are pharmaceutical and health care sector ETFs. The ETF with the highest aggregate weight was the iShares U.S. Pharmaceuticals ETF (IHE), with 16.5%.

In terms of dollar value held, however, broad-market equity funds and single-factor funds once again held the highest amount of money in controversial stocks: 

 

10 ETFs With Highest Market Value In Opioid Stocks
Ticker Fund Allocation Weight Combined Market Value ($M) Which Stock(s)?
SPY SPDR S&P 500 ETF Trust 1.88% 5069.21 ABC, CAH, MCH, AGN, JNJ
IVV iShares Core S&P 500 ETF 1.89% 2881.16 ABC, CAH, MCK, AGN, JNJ
XLV Health Care Select Sector SPDR Fund 13.47% 2164.76 ABC, CAH, MCK, AGN, JNJ
VOO Vanguard S&P 500 ETF 1.85% 1686.13 ABC, CAH, MCK, AGN, JNJ
VTI Vanguard Total Stock Market ETF 1.54% 1501.99 All 6
VIG Vanguard Dividend Appreciation ETF 4.80% 1336.43 ABC, MCK, JNJ
VTV Vanguard Value ETF 3.48% 1299.79 ABC, CAH, MCK, AGN, JNJ
IWD iShares Russell 1000 Value ETF 3.10% 1133.92 ENDP, CAH, MCK, AGN, JNJ
VHT Vanguard Health Care ETF 11.27% 818.41 All 6
DIA SPDR Dow Jones Industrial Average ETF Trust 3.34% 749.39 JNJ

Tables sources: ETF.com, FactSet. Data as of June 20, 2018

 

SPY holds $5.1 billion worth of opioid-related stocks, while IVV holds $2.9 billion; that's in addition to the $611 million and $374 million these funds hold, respectively, in detention-related stocks.

Always Look Under The Hood

The main takeaway is this: Though the relevant sector and thematic ETFs often hold the largest percentage of certain controversial stocks in their portfolios, in terms of sheer dollars held, broad-based equity ETFs hold more by far.

Broad-based, nonsector or nonthematic funds are also the most likely types of ETFs to contain these controversial stocks in their portfolios. Broad-based large-cap equity ETFs represent 35% of all ETFs holding detention stocks and 41% of ETFs holding opioid makers. Broad-based small-cap ETFs represent 55% of funds holding gun makers.  

So if a fund's position in controversial stocks matters to you, then it behooves you to look under the hood of every ETF you own, every time. You must understand not just weightings by percentage, but how much money that percentage translates to.

What may seem like a large weight by percentage in a controversial stock may translate to just a few hundred thousand dollars; and what may appear to be a miniscule weight by percentage can translate to billions of dollars' worth of stock. In short: Impact investing is not for the lazy. 

Contact Lara Crigger at [email protected]

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