As Healthcare Rallies Is the Vanguard Health Care ETF of the Invesco Pharmaceuticals ETF the Better Fund for 2026?
2026-07-22 19:13
•Brendan Coffey •The Motley Fool
•••• ••••• Axe Capital view
Pharma ETFs: Is PJP a Smarter Play than VHT for 2026?
Despite VHT’s broad exposure and lower fees, PJP’s sharper focus on pharma stocks has outpaced it over the medium term.
South African investors often overlook healthcare, yet it’s worth considering how global trends might ripple through the rand and select JSE counters, especially those linked to pharmaceuticals. The Vanguard Health Care ETF (VHT) offers diversification with over 400 stocks at low costs and a decent dividend yield. But it’s the Invesco Pharmaceuticals ETF (PJP) that’s dominated returns recently, thanks to a tighter focus on fewer pharma-heavyweights that surged on innovation and patent wins. While PJP’s higher fees partly offset gains, it has delivered almost double the 3-year annual returns compared to VHT. For local investors, this suggests a preference for selective biotech and pharma exposure via USD/ZAR when funding offshore exposure, as large JSE players like Aspen and Adcock Ingram offer less global scale. The risk is a pharma regulatory shock or pipeline failures hitting PJP’s concentrated holdings hard, something VHT’s broader mix cushions better. Still, for those betting on pharmaceuticals outperforming, PJP looks compelling this year. this is just my opinion and not financial advice
I’d watch USD/ZAR closely to time entries into PJP, using VHT as a hedge or longer-term hold. Avoid broad local healthcare counters for now.
- PJP
- VHT
- USD/ZAR
- Pharma pipeline failures or FDA regulatory setbacks
- Rand volatility impacting offshore purchase power
6/10
The article compares two healthcare-focused ETFs: Vanguard Health Care ETF (VHT) and Invesco Pharmaceuticals ETF (PJP). VHT offers broader sector exposure with 411 holdings, a lower expense ratio of 0.09%, and higher dividend yield of 1.60%. PJP focuses narrowly on 29 pharmaceutical stocks with a 0.57% expense ratio and 0.90% yield. Despite VHT's cost advantages, PJP has significantly outperformed over 3 and 5-year periods (17.3% and 9.1% returns respectively), leading the author to recommend PJP as the better buy for 2026.
This article was originally published by The Motley Fool and has been adapted here for Axe Capital Trading News.
Publisher: The Motley Fool
Author: Brendan Coffey
Categories: Rates, Equities, Capital Returns, Healthcare
Tickers: VHT, PJP, LLY, JNJ, ABBV
Sentiment: Positive - VHT is praised for its rock-bottom expense ratio of 0.09%, higher dividend yield of 1.60%, broad diversification across 411 healthcare stocks, and strong 1-year performance of 25.20%. However, it underperforms PJP over longer timeframes. PJP is recommended as the better buy for 2026 due to consistent outperformance over 3-year (17.3%), 5-year (9.1%), and 10-year (7.5%) periods, with exceptional 1-year returns of 45.10%. The concentrated approach in 29 pharmaceutical stocks has proven effective despite higher expense ratio.
Keywords: healthcare ETF, pharmaceutical stocks, expense ratio, dividend yield, fund performance, sector exposure, investment comparison
Insights:
- VHT: Positive: VHT is praised for its rock-bottom expense ratio of 0.09%, higher dividend yield of 1.60%, broad diversification across 411 healthcare stocks, and strong 1-year performance of 25.20%. However, it underperforms PJP over longer timeframes.
- PJP: Positive: PJP is recommended as the better buy for 2026 due to consistent outperformance over 3-year (17.3%), 5-year (9.1%), and 10-year (7.5%) periods, with exceptional 1-year returns of 45.10%. The concentrated approach in 29 pharmaceutical stocks has proven effective despite higher expense ratio.
- LLY: Neutral: Eli Lilly is mentioned as a major holding in both funds (14.2% in VHT, 5.4% in PJP), indicating its significance in the healthcare sector, but no specific performance commentary is provided.