Exchange-traded funds (or ETFs) are securities that are publicly traded on stock markets, but that track an index, a commodity, or a basket of assets. ETFs are designed for investors who do not have the capacity to hold many stocks, but who are interested in diversified investment within a sector or industry.
The above chart compares ETF returns compared with Merck and Co.’s (MRK) performance over a five-year period. The total return for Merck’s share price on the NYSE from June 2010–May 2015 has been ~17.1%, which is much lower than the ETFs focused on the Pharmaceutical segment. The rest of this article discusses the major ETFs holding Merck stock.
SPDR Healthcare Select Sector ETF (XLV)
XLV has been operational since 1998, and it has net assets of $13 billion. Merck forms 6.2% of the total assets of this fund. Its total return over the last five years was over 23.2%.
PowerShares Dynamic Pharmaceuticals ETF (PJP)
PJP has been active since 2005, and its net assets total $1.62 billion. Merck forms 5.4% of this fund’s total assets. PJP’s total return over the last five years was over 34.7%.
SPDR S&P Pharmaceuticals ETF (XPH)
This fund tracks an index that represents the pharmaceutical sub-industry portion of the S&P Total Markets Index. This fund has been operational since 2006, and its net assets are $1.11 billion. Merck forms 3.5% of XPH’s total assets, and the fund’s total returns over the last five years were over 28.2%.
iShares US Pharmaceuticals Index Fund (IHE)
IHE has been in operation since 2006, and its net assets are $888.97 million. Merck forms nearly 8.5% of the total assets of this fund. The fund’s total return over the last five years was more than 27.9%.
VanEck Vectors Pharmaceutical ETF (PPH)
This fund has been active since 2011, and it has net assets of $345.54 million. Merck and Co. forms over 5% of this fund’s total assets. The fund also holds Merck’s competitors such as Johnson & Johnson (JNJ), Novartis AG (NVS), and Pfizer (PFE). The fund’s total return over the last three years was over 29%.