Biotech ETFs Hit New 2015 Highs

The biotech momentum story continues to be one of the most persistent themes over the last several years.  The diversified indices that track these companies have been consistent market leaders and investors that have stuck with these stocks have been richly rewarded.

On Thursday, the iShares NASDAQ Biotechnology ETF (IBB) hit a new all-time high as it surged more than 3 percent intra-day.  This ETF is the largest dedicated biotech industry fund with nearly $9 billion in total assets. 

IBB tracks a market cap weighted index of top health care names such as Gilead Sciences Inc (GILD) and Amgen Inc (AMGN).  These companies are engaged in the fight to cure diseases and develop lifesaving drugs, but the story that investors are cheering is their year-to-date performance.

So far in 2015, IBB has gained more than 24 percent and is 51 percent higher over the last full year.  The jump in IBB is now on par with Guggenheim Solar ETF (TAN) as the two top performing industry groups so far this year. 

Another fund that has quickly staked out a name for itself in the biotech group is the ALPS Medical Breakthroughs ETF (SBIO).  This ETF tracks 73 underlying stocks with market capitalizations less than $5 billion. 

The smaller company focus of SBIO is overlaid with fundamental screens to ensure sustainable cash flow and clinical trial suitability.  In addition, this ETF has 25 percent of its portfolio dedicated to pharmaceutical stocks.

SBIO debuted in late 2014 and has amassed $92 million in total assets.  So far this year, this ETF has gained over 44 percent and continues to be one of the top performing funds in its class.

It’s also worth noting that the biotechnology theme has been a tailwind for broad-based ETFs such as the Health Care Select Sector SPDR (XLV) and PowerShares QQQ (QQQ). 

Some experts worry that this industry group may be reaching bubble territory, yet prices continue to surge higher nonetheless.  IBB underwent two brief bouts of volatility this year in March and April that it ultimately overcame in a convincing manner.