XLV vs. TQQQ: What’s The Difference?

The Health Care Select Sector SPDR Fund (XLV) and the ProShares UltraPro QQQ (TQQQ) are both among the Top 100 ETFs. XLV is a SPDR State Street Global Advisors Health fund and TQQQ is a ProShares Trading–Leveraged Equity fund. So, what’s the difference between XLV and TQQQ? And which fund is better?

The expense ratio of XLV is 0.83 percentage points lower than TQQQ’s (0.12% vs. 0.95%). XLV also has a higher exposure to the healthcare sector and a lower standard deviation. Overall, XLV has provided lower returns than TQQQ over the past ten years.

In this article, we’ll compare XLV vs. TQQQ. We’ll look at fund composition and performance, as well as at their annual returns and holdings. Moreover, I’ll also discuss XLV’s and TQQQ’s risk metrics, portfolio growth, and industry exposure and examine how these affect their overall returns.

Summary

XLV TQQQ
Name Health Care Select Sector SPDR Fund ProShares UltraPro QQQ
Category Health Trading–Leveraged Equity
Issuer SPDR State Street Global Advisors ProShares
AUM 27.88B 12.41B
Avg. Return 15.02% 61.22%
Div. Yield 1.4% 0.0%
Expense Ratio 0.12% 0.95%

The Health Care Select Sector SPDR Fund (XLV) is a Health fund that is issued by SPDR State Street Global Advisors. It currently has 27.88B total assets under management and has yielded an average annual return of 15.02% over the past 10 years. The fund has a dividend yield of 1.4% with an expense ratio of 0.12%.

The ProShares UltraPro QQQ (TQQQ) is a Trading–Leveraged Equity fund that is issued by ProShares. It currently has 12.41B total assets under management and has yielded an average annual return of 61.22% over the past 10 years. The fund has a dividend yield of 0.0% with an expense ratio of 0.95%.

XLV’s dividend yield is 1.40% higher than that of TQQQ (1.4% vs. 0.0%). Also, XLV yielded on average 46.20% less per year over the past decade (15.02% vs. 61.22%). The expense ratio of XLV is 0.83 percentage points lower than TQQQ’s (0.12% vs. 0.95%).

Fund Composition

Industry Exposure

XLV vs. TQQQ - Industry Exposure

XLV TQQQ
Technology 0.0% 0.0%
Industrials 0.0% 0.0%
Energy 0.0% 0.0%
Communication Services 0.0% 0.0%
Utilities 0.0% 0.0%
Healthcare 100.0% 0.0%
Consumer Defensive 0.0% 0.0%
Real Estate 0.0% 0.0%
Financial Services 0.0% 0.0%
Consumer Cyclical 0.0% 0.0%
Basic Materials 0.0% 0.0%

The Health Care Select Sector SPDR Fund (XLV) has the most exposure to the Healthcare sector at 100.0%. This is followed by Technology and Industrials at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.

XLV’s mid-section with moderate exposure is comprised of Consumer Defensive, Utilities, Communication Services, Energy, and Industrials stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

The ProShares UltraPro QQQ (TQQQ) has the most exposure to the Technology sector at 0.0%. This is followed by Industrials and Energy at 0.0% and 0.0% respectively. Consumer Cyclical (0.0%), Financial Services (0.0%), and Real Estate (0.0%) only make up 0.00% of the fund’s total assets.

TQQQ’s mid-section with moderate exposure is comprised of Consumer Defensive, Healthcare, Utilities, Communication Services, and Energy stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.0%.

XLV is 100.00% more exposed to the Healthcare sector than TQQQ (100.0% vs 0.0%). XLV’s exposure to Technology and Industrials stocks is 0.00% lower and 0.00% lower respectively (0.0% vs. 0.0% and 0.0% vs. 0.0%). In total, Consumer Cyclical, Financial Services, and Real Estate also make up 0.00% less of the fund’s holdings compared to TQQQ (0.00% vs. 0.00%).

Holdings

XLV - Holdings

XLV Holdings Weight
Johnson & Johnson 9.19%
UnitedHealth Group Inc 8.01%
Pfizer Inc 4.64%
Abbott Laboratories 4.36%
AbbVie Inc 4.21%
Thermo Fisher Scientific Inc 4.2%
Merck & Co Inc 4.17%
Eli Lilly and Co 3.87%
Danaher Corp 3.61%
Medtronic PLC 3.54%

XLV’s Top Holdings are Johnson & Johnson, UnitedHealth Group Inc, Pfizer Inc, Abbott Laboratories, and AbbVie Inc at 9.19%, 8.01%, 4.64%, 4.36%, and 4.21%.

Thermo Fisher Scientific Inc (4.2%), Merck & Co Inc (4.17%), and Eli Lilly and Co (3.87%) have a slightly smaller but still significant weight. Danaher Corp and Medtronic PLC are also represented in the XLV’s holdings at 3.61% and 3.54%.

TQQQ - Holdings

TQQQ Holdings Weight
Nasdaq 100 Index Swap Goldman Sachs International 45.11%
Nasdaq 100 Index Swap Societe Generale 44.73%
Nasdaq 100 Index Swap Bnp Paribas 38.05%
Nasdaq 100 Index Swap Bank Of America Na 31.53%
Nasdaq 100 Index Swap Citibank Na 31.49%
Nasdaq 100 Index Swap Jp Morgan Securities 26.2%
Apple Inc 7.49%
Microsoft Corp 6.69%
Nasdaq 100 Index Swap Credit Suisse International 5.9%
Amazon.com Inc 5.68%

TQQQ’s Top Holdings are Nasdaq 100 Index Swap Goldman Sachs International, Nasdaq 100 Index Swap Societe Generale, Nasdaq 100 Index Swap Bnp Paribas, Nasdaq 100 Index Swap Bank Of America Na, and Nasdaq 100 Index Swap Citibank Na at 45.11%, 44.73%, 38.05%, 31.53%, and 31.49%.

Nasdaq 100 Index Swap Jp Morgan Securities (26.2%), Apple Inc (7.49%), and Microsoft Corp (6.69%) have a slightly smaller but still significant weight. Nasdaq 100 Index Swap Credit Suisse International and Amazon.com Inc are also represented in the TQQQ’s holdings at 5.9% and 5.68%.

Risk Analysis

XLV TQQQ
Mean Return 1.27 4.65
R-squared 58.19 83.64
Std. Deviation 12.94 50.08
Alpha 7.75 7.29
Beta 0.7 3.37
Sharpe Ratio 1.13 1.1
Treynor Ratio 21.1 15.65

The Health Care Select Sector SPDR Fund (XLV) has a Sharpe Ratio of 1.13 with a Alpha of 7.75 and a R-squared of 58.19. Its Standard Deviation is 12.94 while XLV’s Beta is 0.7. Furthermore, the fund has a Treynor Ratio of 21.1 and a Mean Return of 1.27.

The ProShares UltraPro QQQ (TQQQ) has a Sharpe Ratio of 1.1 with a Alpha of 7.29 and a Treynor Ratio of 15.65. Its Standard Deviation is 50.08 while TQQQ’s Mean Return is 4.65. Furthermore, the fund has a Beta of 3.37 and a R-squared of 83.64.

XLV’s Mean Return is 3.38 points lower than that of TQQQ and its R-squared is 25.45 points lower. With a Standard Deviation of 12.94, XLV is slightly less volatile than TQQQ. The Alpha and Beta of XLV are 0.46 points higher and 2.67 points lower than TQQQ’s Alpha and Beta.

Performance

Annual Returns

XLV vs. TQQQ - Annual Returns

Year XLV TQQQ
2020 13.33% 109.85%
2019 20.63% 133.93%
2018 6.3% -19.65%
2017 21.7% 118.65%
2016 -2.83% 11.04%
2015 6.82% 17.41%
2014 25.17% 56.82%
2013 41.24% 139.98%
2012 17.56% 51.95%
2011 12.44% -7.77%
2010 2.91% 0.0%

XLV had its best year in 2013 with an annual return of 41.24%. XLV’s worst year over the past decade yielded -2.83% and occurred in 2016. In most years the Health Care Select Sector SPDR Fund provided moderate returns such as in 2011, 2020, and 2012 where annual returns amounted to 12.44%, 13.33%, and 17.56% respectively.

The year 2013 was the strongest year for TQQQ, returning 139.98% on an annual basis. The poorest year for TQQQ in the last ten years was 2018, with a yield of -19.65%. Most years the ProShares UltraPro QQQ has given investors modest returns, such as in 2015, 2012, and 2014, when gains were 17.41%, 51.95%, and 56.82% respectively.

Portfolio Growth

XLV vs. TQQQ - Portfolio Growth

Fund Initial Balance Final Balance CAGR
XLV $10,000 $42,899 15.02%
TQQQ $10,000 $593,012 61.22%

A $10,000 investment in XLV would have resulted in a final balance of $42,899. This is a profit of $32,899 over 10 years and amounts to a compound annual growth rate (CAGR) of 15.02%.

With a $10,000 investment in TQQQ, the end total would have been $593,012. This equates to a $583,012 profit over 10 years and a compound annual growth rate (CAGR) of 61.22%.

XLV’s CAGR is 46.20 percentage points lower than that of TQQQ and as a result, would have yielded $550,113 less on a $10,000 investment. Thus, XLV performed worse than TQQQ by 46.20% annually.


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