As Cost Panel Gets Delayed, Buy These 3 Biotech ETFs

Biotechnology stocks climbed up yesterday and today on news that a cost-cutting body from Obamacare, known as the Independent Payment Advisory Board (IPAB), is expected to be enacted in 2017.

While this means that biotech companies will have issues to address next year, no major drug pricing enforcement is expected to take place in 2016. With this in mind, a few notable biotech ETFs may be worth picking up for the short term.

Below are three such ETFs, all of which are trading at a considerable discount compared to their 52-week highs. This may be a great opportunity to pick them up, as the recent rally for biotech stocks could see more momentum over the short term.

VanEck Vectors Biotech ETF- (CM:BBH)

The VanEck Vectors Biotech ETF seeks to replicate the performance of the MVIS US Listed Biotech 25 Index. The index tracks the performance of the 25 largest US listed biotech companies. Because the vast majority of its assets are listed in the US, it stands to reap the benefits that come with not seeing any cost cutting enforcement this year.

The fund has lost 25% in value over the last year. It is not too far from its 52-week low right now, so there is considerable upside for the fund. The ETF has an expense ratio of just 0.35%, and it also has a dividend yield of 0.33%. This makes an investment in BBH very cheap. The fund is up about 2% today, and it holds a Zacks ETF Rank #2 (Buy).

First Trust NYSE Arca Biotech ETF- (LON:FBT)

This ETF attempts to mimic the performance of the equally weighted index called Arca Biotechnology Index. The index has 30 holdings, and it seeks to measure the performance of a cross section of companies in the biotechnology industry which are primarily involved in the use of biological processes to develop products or provide services.

FBT has a larger exposure to small and mid-cap stocks. It only has a 36.52% exposure to large cap corporations. It should be noted that this fund is exposed to the biotechnology, pharmaceutical, and advanced medical equipment industries, with allocations of 77.97%, 13.74%, and 8.29% in those industries, respectively. First Trust NYSE Arca Biotech ETF has a 0.60% expense ratio, and 97.31% of its net assets are listed in the US. FBT holds a Zacks ETF Rank #2 (Buy).

ProShares UltraPro Nasdaq Biotechnology ETF-UBIO

If you are particularly bullish on biotechnology, then the ProShares UltraPro Nasdaq Biotechnology ETF is the right fund for you. That’s because this leveraged ETF gives you 3x exposure to the Nasdaq Biotechnology Index. The index is market cap weighted, and it contains 195 holdings. The portfolio of the index has about 56% exposure to large cap stocks.

Over the last year, the ETF has lost over 75% of its value. Over the last two days though, UBIO has been on a major tear, surging by 6%. The fund has an expense ratio of 0.95%, which makes it a little expensive for an ETF. The potential to reap massive profits with this fund makes the annual expense a fair price to pay though.

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