Medical Equipment ETF (XHE) Added To Tactical Sleeves

3-Years

This shows the relative total return performance of SPY, XLV and XHE over the past 3 years.

The next two charts add another healthcare ETF (PSCH) currently in our tactical sleeve, and also as a useful comparison, the iShares momentum factor ETF (MTUM).

1-Year

3-Years

Currently, of the 18 momentum ETFs identified by our filter, they are all small-cap, technology, health care, except for one retail ETF.

The relative returns of the five identified ETFs can also be viewed in tabular form to isolate specific trailing periods from 1 month to 3 years, as shown here:

(Click on image to enlarge)

Additionally, you can see the volatility (standard deviation) and Sharpe Ratio [(total return in excess of T-Bill return)/standard deviation)].

XHE is generally higher return than SPY and XLV, but is also more volatile. However, its Sharpe Ratio (return you get for the volatility of the ride) is competitive with the S&P 500.

This next table presents some comparative valuation and fundamental data.

(Click on image to enlarge)

XHE has higher valuation ratios, lower yield, lower ROE and ROA than the S&P 500 and its health care sector, which are risk factors. It has somewhat lower debt.

The following table shows a “growthier” XHE, compared to the S&P 500 and its health care sector. Its 1-year PEG (P/E divided by 1-year forward earnings growth expectations) is competitive with the S&P 500 and better than the S&P 500 healthcare sector.

State Street Global advisors forecasts a 14.6% 3-5 year earnings growth path for the health care sector versus a 13.4% path for the S&P 500.

Looking inside of XHE’s 74 holdings, and comparing them to the holdings of factor funds operated by Vanguard, we see that 33 of them accounting for 48% of XHE assets by weight are included in the portfolio of VFMO (Vanguard’s momentum ETF based on the Russell 3000).

We also see that 9 XHE holdings (16% of its assets by weight) are included in VFMF (Vanguard’s multi-factor fund, also based on the Russell 3000). The multi-factor fund holds stocks that present a balance of attributes between value, quality and momentum, after excluding the most volatile stocks.

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Disclaimer: "QVM Invest”, “QVM Research” are service marks of QVM Group LLC. QVM Group LLC is a registered investment advisor.

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