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Best Sector ETF of Q3 and its Top-Performing Stocks

The biotech sector led the U.S. stock market higher last quarter with Virtus LifeSci Biotech Clinical Trials ETF BBC topping the list of the best-performing ETFs, logging impressive returns of about 21.4%. BBC carries a Zacks ETF Rank #3 (Hold) with a High risk outlook.

The surge in the fund was largely driven by volatility and uncertainty, especially tensions between the United States and North Korea and Hurricane Harvey that led to a shift in investors’ sentiment to defensive sectors. These sectors generally outperform during periods of low growth and high uncertainty. Additionally, an uncertain Fed policy, Washington turmoil and fears over the implementation of President Donald Trump’s pro-growth agenda continue to raise the appeal for defensive stocks (read: Volatility Shakes Market: Top and Flop ETFs Over a Month).

Apart from these, encouraging industry trends including the wave of mergers and acquisitions, an accelerated pace of innovation, promising drug launches, growing importance of biosimilars, cost-cutting efforts, an aging population, expanding insurance coverage, the growing middle class, an insatiable demand for new drugs, and ever-increasing health care spending are fueling growth in the sector.

Let’s take a closer look at the fundamentals of BBC and its performance.

BBC in Focus

This fund has a novel approach to biotechnology investing with exposure to companies that are in the clinical trials’ stage. This can easily be done by tracking the LifeSci Biotechnology Clinical Trials Index. BBC is a small-cap centric fund, having amassed $31.6 million in its asset base. It charges 79 bps in fees per year from investors and trades in light average daily volume of around 11,000 shares.

Holding 75 stocks in its basket, it is widely spread out across various components with each holding less than 3.2% share. Though most of the stocks in the fund’s portfolio delivered strong returns, a few were the real stars (read: Should You Keep Your Portfolio Healthy with Biotech ETFs?).

Below we have highlighted those five best-performing stocks in the ETF with their respective positions in the fund’s basket:

Best Performing Stocks of BBC

MyoKardia Inc. MYOK: The stock surged about 218.6% last quarter and carries a Zacks Rank #3 with solid Zacks Industry Rank in the top 41%. However, MyoKardia saw its earnings estimates deteriorating from a loss of $1.57 to a loss of $1.60 for this year in the past three months. It also has an unfavorable VGM Style Score of F. MYOK occupies the top spot in the fund’s basket with 3.2% of the total assets (see: all the Health Care ETFs here).

Dynavax Technologies Corporation DVAX: This stock takes the second position in the fund’s basket with 2.8% allocation. It delivered incredible returns of 124% in the third quarter and belongs to a similar Industry Rank as that of MYOK. However, the stock saw its earnings estimates moving from a loss of $1.30 to a loss of $1.75 for this year in the last 90 days. The stock has a Zacks Rank #3 with a VGM Style Score of F.

Insmed Incorporated INSM: Like its peers, this stock has also witnessed negative earnings estimate revision of 16 cents for this year in the past three months and has a Zacks Rank #3 with a VGM Style Score of F. Insmed gained 77% last quarter and falls in a similar Industry Rank. The stock occupies the fifth position in the fund’s portfolio, making up for 2% share.

Kite Pharma Inc. KITE: It currently has a Zacks Rank #3 with a VGM Style Score of F and belongs to a similar Industry Rank. The stock soared nearly 73.6% in the third quarter despite negative earnings estimate revision of 21 cents for the current year in the past 90 days. It is the fourth firm and accounts for 2.1% share in BBC (read: Biotech ETFs Soar on Gilead-Kite Deal).

Sangamo Therapeutics Inc. SGMO: This stock takes the seventh spot in the fund’s basket with 2% of assets. It was up 69.5% last quarter and saw positive earnings estimate revision of seven cents for this year in the last three months. Sangamo Therapeutics currently has a Zacks Rank #2 (Buy) with a VGM Style Score of D and belongs to a solid Zacks Industry Rank in the top 41%.

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BIOSH-BIO CLNCL (BBC): ETF Research Reports
 
Dynavax Technologies Corporation (DVAX): Free Stock Analysis Report
 
Sangamo Therapeutics, Inc. (SGMO): Free Stock Analysis Report
 
Insmed, Inc. (INSM): Free Stock Analysis Report
 
Kite Pharma, Inc. (KITE): Free Stock Analysis Report
 
MyoKardia, Inc. (MYOK): Free Stock Analysis Report
 
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