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Should You Invest in the Fidelity MSCI Health Care Index ETF (FHLC)?

Launched on 10/21/2013, the Fidelity MSCI Health Care Index ETF (FHLC) is a passively managed exchange traded fund designed to provide a broad exposure to the Healthcare - Broad segment of the equity market.

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Healthcare - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 10, placing it in bottom 38%.

Index Details

The fund is sponsored by Fidelity. It has amassed assets over $2.93 billion, making it one of the larger ETFs attempting to match the performance of the Healthcare - Broad segment of the equity market. FHLC seeks to match the performance of the MSCI USA IMI Health Care Index before fees and expenses.

The MSCI USA IMI Health Care Index represents the performance of the health care sector in the U.S. equity market.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.08%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 0.87%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Healthcare sector--about 100% of the portfolio.

Looking at individual holdings, Johnson + Johnson Common Stock Usd1.0 (JNJ) accounts for about 6.94% of total assets, followed by Unitedhealth Group Inc Common Stock Usd.01 (UNH) and Thermo Fisher Scientific Inc Common Stock Usd1.0 (TMO).

The top 10 holdings account for about 41.75% of total assets under management.

Performance and Risk

So far this year, FHLC has lost about -3.26%, and is up about 11.40% in the last one year (as of 01/13/2022). During this past 52-week period, the fund has traded between $56.27 and $68.98.

The ETF has a beta of 0.80 and standard deviation of 20.48% for the trailing three-year period, making it a medium risk choice in the space. With about 479 holdings, it effectively diversifies company-specific risk.

Alternatives

Fidelity MSCI Health Care Index ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FHLC is a reasonable option for those seeking exposure to the Health Care ETFs area of the market. Investors might also want to consider some other ETF options in the space.

Vanguard Health Care ETF (VHT) tracks MSCI US Investable Market Health Care 25/50 Index and the Health Care Select Sector SPDR ETF (XLV) tracks Health Care Select Sector Index. Vanguard Health Care ETF has $16.80 billion in assets, Health Care Select Sector SPDR ETF has $35.92 billion. VHT has an expense ratio of 0.10% and XLV charges 0.12%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.


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Fidelity MSCI Health Care Index ETF (FHLC): ETF Research Reports
 
UnitedHealth Group Incorporated (UNH): Free Stock Analysis Report
 
Johnson & Johnson (JNJ): Free Stock Analysis Report
 
Thermo Fisher Scientific Inc. (TMO): Free Stock Analysis Report
 
Health Care Select Sector SPDR ETF (XLV): ETF Research Reports
 
Vanguard Health Care ETF (VHT): ETF Research Reports
 
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