Brief Breakdown: iShares U.S. Healthcare ETF (Ticker: IYH)
In my Brief Breakdowns,I pick a stock and present opposite sides – I present the bullish argument and the bearish argument.
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Company Description and Qualitative Analysis
The iShares U.S. Healthcare ETF is an ETF that is composed of US equities all in the healthcare sector. This ETF gives investors exposure to healthcare equipment and services, pharmaceuticals, and biotechnology companies. The healthcare industry is a vital part of everyday life and a growing necessity in the post-COVID world. Whether you agree or not, many Americans take pharmaceuticals daily and rely on prescription medicine and it seems to be an increasing trend. An estimated 131 million (66%) of American adults are on prescription medicine and that is a trend that is not slowing down. This ETF allows you as an investor to be involved in aspects of that along with additional aspects of the healthcare sector, such as insurance.
Quantitative Analysis
At the time of this writing (10/10/2022), IYH is trading at $245.50 with a 52 week range of $247.38 - $302.66. The top 10 holdings of UnitedHealth Group at 10.01%, Johnson and Johnson at 8.78%, Eli Lilly at 5.78%, Abbvie Inc at 5.11%, Pfizer at 5.02%, Merck & Co Inc at 4.56%, Thermo Fisher Scientific at 4.36%, Danaher Corp at 3.71%, Abbott Laboratories at 3.62% and Bristol Myers Squibb at 3.08%. iShares also provides in-depth metrics about the holding, I have provided some of them below. You can view IYH holdings here.
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Bullish Thesis
Here are three points to support the bullish thesis updates:
American Reliance on Pharmacy: As stated in the qualitative analysis, 66% of American adults rely on pharmaceutical drugs and that number does not seem to be slowing. More pharmaceuticals are being developed by the day and it seems more and more Americans stay reliant on drugs. As Americans get older, more drugs are needed in order to maintain function and that means more reliance on pharmaceuticals.
Addictive Qualities of Pharmaceuticals: Let’s be real here, big pharma deals legal drugs which have qualities that make consumers rely on these drugs. These addictive qualities make for anticipated revenue and potential growth as the addictions persist. As more and more of these drugs come online, more continue to continually obtain these drugs.
Insurance Necessity: The largest holding is UnitedHealth which is the majority of the ETF and as I put in my breakdown of UNH (can read the whole thing here): Health insurance is an increasing necessity in today’s society. Now with the passing of the COVID-19 pandemic, everyone is seemingly more conscious of their own health and that also comes with health insurance. More potential employees will take benefits into account with the growing number of jobs available.
Bearish Thesis
Here are three points to support the bearish thesis:
Only America Exposure: Although America is the most reliant of any country in the world on the healthcare industry, this ETF does not have any global exposure. America can hammer down on some regulations and change policy on big pharma and that could dramatically change the healthcare industry in the United States. Having your eggs all in one basket (although America is the leader in healthcare spend globally) could lead to more risk.
Potential Movement against Big Pharma: We’ve seen a whirlwind of push back towards big pharma recently (because of this whole thing post lockdown, don’t want to get canceled over here). But if there are some adverse effects from a said jab there may be a reversion from the over-prescribed American population.
Limited Retail Exposure: Without some of the major holdings being a CVS or a Walgreens, there is limited exposure in this ETF in the pharmaceutical companies. CVS and other big name retailers offer over-the-counter drugs which can be a huge source of profit. I believe this ETF is limited in some of the steady growth that a retail storefront could provide.
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Brandon
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Disclosure: The article was written by Brandon Keys, and it expresses the author's own opinions. I am not receiving compensation for it. I have no business relationships with any company whose stock is mentioned in this article. The information presented in this article is for informational purposes only and in no way should be construed as financial advice or recommendation to buy or sell any stock. Brandon is not a financial advisor. I encourage all readers to do further research and do your own due diligence before making any investments.