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Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some biotech and genome-focused stocks to your portfolio, the PowerShares Dynamic Biotech & Genome ETF (NYSEMKT: PBE ) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.
ETFs often sport lower expense ratios than their mutual fund cousins. The PowerShares ETF's expense ratio -- its annual fee -- is 0.63%. The fund is fairly small, too, so if you're thinking of buying, beware of possibly large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.
This ETF has performed rather well, outperforming the world markets over the past three and five years. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
The biotechnology arena is a very promising one for investors due to our planet's growing and aging population, which will require more medical care over time. It's not without risks, though, as many new treatments are costly to develop and don't always clear FDA hurdles.
More than a handful of biotech and genome-focused companies had strong performances over the past year. Keryx Biopharmaceuticals (NASDAQ: KERX ) soared 455%, with investors expecting great things from its kidney-disease drug Zerenex. Results for the drug have been good so far, and the company is looking to expand its applications and approvals. It's worth noting, though, that its experimental colorectal cancer drug perifosine recently posted disappointing results, taking the stock down some.
Pharmacyclics (NASDAQ: PCYC ) surged 189%, largely on enthusiasm over its ibrutinib, which recently became the first cancer drug to receive "breakthrough therapy" designation from the FDA. Its most recent quarterly earnings also beat expectations. Still, valuing biotech stocks can be tricky, and some prefer to wait for established results instead of promise. In recent years, the company has issued more shares, diluting the value of existing shares. If one or more of its drugs is a big hit, however, that won't be such a big concern.
Isis Pharmaceuticals (NASDAQ: IONS ) jumped 155%, partly on FDA approval of its Kynamro cholesterol drug. The company has more than a dozen formulas in its pipeline, so additional approvals and revenue streams are also possibilities in coming years. It has partnered with lots of bigger pharmaceutical companies, which is both good and bad -- providing funding but also taking a share of profits.
OPKO Health (NYSE: OPK ) gained 64%, as it develops diagnostic tests for Alzheimer's disease and a bunch of cancers. It also has pharmaceutical, nutraceutical, and veterinary products on the market in Europe and Latin America. OPKO has been buying companies and growing rapidly, but it's also posting net losses and negative free cash flow.
The big picture
Demand for medical and scientific research isn't going away anytime soon. A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.
While you can certainly make huge gains in biotech and pharmaceuticals, the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.