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Medical Device ETFs: Much Higher YTD Returns in 2018

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Sep. 10 2018, Published 3:32 p.m. ET

Medical Device ETFs

The iShares U.S. Medical Devices ETF (IHI) and the SPDR S&P Health Care Equipment ETF (XHE), both medical device funds, have returned 26.8% and $37%, respectively, in 2018 YTD (year-to-date). That’s significantly higher than the SPDR S&P 500 ETF (SPY) at 9.7% for the same period.

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ETF characteristics

XHE is invested 100% in the healthcare sector and is currently trading at a PE ratio of 31.6x. It has reported a one-year total return of 44.9% and a three-year total return of 16.7%. IHI is also invested 100% in the healthcare sector but is trading at a much lower PE multiple of 26.3x. IHI has reported a one-year total return of 32.9% and a three-year total return of 23.6%.

The top ten stocks account for 22% of XHE’s total holdings. Most of them are pure plays in specific therapeutic areas. On the other hand, IHI is less diversified with its top ten stocks accounting for 56.8% of its total holdings. Most of the leading stocks in IHI are diversified medical device companies.

Investors should pay attention not only to medical device ETFs but also to high-performing MedTech stocks that are part of these ETFs.

In the next part, we’ll look at Tandem Diabetes Care, which accounts for 4.2% of XHE’s total portfolio holdings.

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