Momentum and quality

The PowerShares Dynamic Biotechnology & Genome Portfolio ETF (PBE) consists of 30 biotechnology stocks. It is based on the Dynamic Biotech & Genome Intellidex Index. According to the fund’s website, the Intellidex Index “is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including: price momentum, earnings momentum, quality, management action, and value.” The ETF uses a blend of thematic and fundamental factors for investment purposes.

Outlook for PBE’s Biotechnology Subsectors

Breakdown of subsectors

Biotechnology subsectors form the largest component of PBE. 23 of the 30 holdings are from internationally recognized biotechnology companies. Pharmaceuticals and other healthcare products form the minor components of PBE. PBE currently manages a total net asset of $425 million with an expense ratio of 0.63%.

Moving averages and earnings

Amgen (AMGN), Incyte (INCY), Myriad Genetics (MYGN), Biogen Idec (BIIB), and Isis Pharmaceuticals (ISIS) are some of PBE’s top holdings. PBE’s biotechnology subsector is trading below its 100-day moving average by 3.0%, but above it 20-day and 50-day moving averages by 1.3% and 4.0%, respectively. SPY’s biotechnology sector is riding high due to strong earnings in 3Q15, beating analyst estimates by 11.1% and achieving a QoQ (quarter-over-quarter) earnings growth of 36.4%. In the next part of this series, we’ll look at the effects of adding PBE to a portfolio.

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