ETF Spotlight: Biotech

Biotech is an exciting industry that can mean big financial wins if you bet on the right horse. But as it’s still in its early days, with many companies throwing their hats in the ring, investing in biotech is risky. This is the sector that’s often in the news for technological advances and medical breakthroughs, but it takes a psychic to know which biotech firms will rise to the top and which will fade into oblivion. If you don’t have paranormal powers, ETFs are a great way to get exposure in biotech at a lower cost and with less risk. According to Wall Street analysts, two of the top biotech ETFs with significant upside potential are IBB and XBI.

SPDR S&P Biotech ETF (XBI)

XBI replicates the S&P Biotechnology Select Industry Index. This ETF, comprising 140 stocks, has $7.13 billion in AUM (Assets Under Management). Its top 10 holdings, which include Novavax (NVAX), Insmed (INSM), Moderna (MRNA), Amgen (AMGN), and Vertex Pharmaceuticals (VRTX), make up 28.46% of the portfolio. It has an expense ratio of 0.35% and a year-to-date 4% return. Analysts give it a Strong Buy rating, with 132 buys and 8 holds. The average price target of $153.63, with a high forecast of $340.51, suggests a 66.64% upside potential from its current price of $91.99.

iShares Biotechnology ETF (IBB)

IBB tracks the NYSE Biotechnology Index. This iShares biotech ETF has $7.40 billion in AUM, with 21 stocks held. Its top 10 holdings, which comprise 52.06% of the portfolio, include Amgen, Vertex Pharmaceuticals, Gilead Sciences (GILD), Moderna, and Biogen (BIIB). It also boasts a low expense ratio of 0.45% and a 1.13% return in the year so far. This ETF has a Moderate Buy rating from analysts, with 190 buys, 19 holds, and 2 sells. The average price target of $188.38 implies 37.24% upside potential.

Both XBI and IBB have their fingers on the pulse of today’s hottest biotech companies. At around $91.87 and $136.33, they’re reasonably priced for investors wanting their own slice of the biotech pie.

Neither Julie Stoller nor Stocks.News have positions in this company.