It was an excellent week to have money invested in the healthcare sector. Every single one of the most popular exchange-traded funds that focus on the space ended the short week up at least 1.5%, easily outpacing the returns of the S&P 500 over the same time frame.

This week's top-performing healthcare ETF was the iShares Dow Jones US Pharmaceuticals ETF (NYSEMKT:IHE), which gained 2.86% over the past four trading sessions and left the famous index in the dust. 

IHE Price Chart

IHE Price data by YCharts

So what was the secret to IHE's success this week? Let's take a closer look at the inner workings of this fund to see if we can figure out an answer.

iShares Dow Jones US Pharmaceuticals ETF key statistics

Inception Year 2006
Number of Holdings 42
Net Assets $644 million
Average P/E Ratio 30
Yield 1.07%
Expense Ratio 0.45%


The goal of IHE is to give investors an easy way to buy a diversified portfolio of stocks from the U.S. pharmaceutical sector. Right now it holds a stake in 42 companies, with the bulk of its assets concentrated in its top holdings.

Top 10 positions

CompanySymbol% Assets
Johnson & Johnson JNJ 9.53%
Pfizer PFE 8.73%
Merck & Co. MRK 7.48%
Bristol-Myers Squibb BMY 6.93%
Eli Lilly LLY 5.48%
Allergan AGN 5.39%
Zoetis  ZTS 3.91%
Mylan NV MYL 3.21%
Jazz Pharmaceuticals JAZZ 2.96%
Anacor Pharmacetuicals ANAC 2.67%


Add them up, and these 10 stocks comprise more than 52% of the fund's total assets, so when a few of these stocks perform well -- as they did this week -- the the whole fund does, too.

What went right this week?

Most of this fund's top holdings ended the trading week higher, but two companies in particular -- Mylan NV (NASDAQ:MYL) and Allergan PLC (NYSE:AGN) -- put up standout performances.

AGN Price Chart

AGN Price data by YCharts

Allergan's stock has been getting a lot of attention from billionaire investors, causing shares to soar this week. Recent filings with the SEC showed that John Paulson, one of the world's wealthiest hedge fund managers, made Allergan into his fund's biggest position, comprising about 10.8% of its portfolio. Other billionaire investors, such as Third Point's Dan Loeb and Elliot Management's Paul Singer, have also put a substantial portion of their fund's assets into Allergan.

But the reason the stock jumped this week is that billionaire investor Carl Icahn disclosed that he, too, has taken a big position in the Botox maker. Icahn has a track record of taking big stock positions and then agitating for shareholder-friendly changes, causing many investors to religiously follow his moves.

Mylan NV's stock leapt this week after news broke that its biosimilar version of Roche Holding AG's breast-cancer drug Herceptin performed just as well in phase 3 trials as the brand-name drug. That's great news, since Herceptin sales each yet exceed $6 billion, giving Mylan a real chance at stealing some market share in the not too distant future if regulators give it the thumbs-up. 

What's next for IHE?

IHE has now claimed the title of the week's best-performing healthcare ETF for the fourth time this year, which speaks volumes about how well its strategy of investing in the pharma giants works. With a low expense ratio and a history of winning, this ETF seems like a great choice for investors who want more exposure to the healthcare space.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.