Johnson & Johnson JNJ, a healthcare behemoth with a market cap exceeding $600 billion and a portfolio spanning pharmaceuticals and medical devices, has delivered a stellar year-to-date surge of approximately 24.5%. This performance notably outpaces the S&P 500's roughly 10% rise, effectively doubling the broader market's return.
This dramatic performance might immediately push investor spotlight toward the company, especially against the backdrop of its latest announcement of the historic U.S. FDA approval of its Dual Energy THERMOCOOL SMARTTOUCH SF Platform — a first-of-its-kind cardiac ablation system.
While this unrelenting corporate momentum might entice market participants to increase their stakes heavily in JNJ stock, investing in targeted healthcare exchange-traded funds (ETFs) that hold the company offers a more diversified and potentially less risky approach.
While JNJ's success is compelling, investing in healthcare ETFs that hold the stock offers a more prudent strategy for investors seeking diversified exposure to the sector's growth.
But before exploring these ETFs, it's essential to understand what propelled JNJ's exceptional run and whether the momentum can continue. We'll then examine why healthcare ETFs represent a safer vehicle to capture JNJ’s growth rather than investing in JNJ directly.
What Fueled JNJ’s 24% Surge?
Johnson & Johnson's market-beating outperformance is a direct byproduct of its stellar underlying financials and regulatory wins. A primary catalyst that boosted the stock is undoubtedly its robust first-quarter 2026 results. JNJ delivered an impressive 9.9% year-over-year revenue jump to $24.1 billion, comfortably beating Wall Street’s consensus estimates and prompting management to raise its full-year guidance midpoints to $100.8 billion in sales and $11.55 in adjusted earnings per share.
Supporting this financial engine is a steady stream of clinical triumphs. In June, the European Medicines Agency’s (EMA) Committee for Medicinal Products for Human Use (CHMP) recommended approval for the expanded use of Tecvayli (teclistamab) in multiple myeloma. This followed an FDA label expansion in May for Tremfya (guselkumab), which now includes clinical evidence of inhibiting structural joint damage in adults with active psoriatic arthritis.
These regulatory milestones demonstrate that JNJ is successfully expanding the commercial footprint and clinical advantage of its key oncology and immunology portfolios, thereby strengthening its competitive moat and further boosting investor confidence.
Investors also reacted optimistically to JNJ’s aggressive long-term growth commitments. Last month, the company announced a massive capital expenditure of more than $1 billion to scale its Vision business operations in Jacksonville, FL. Aimed at drastically scaling production for its ACUVUE contact lenses, this project is part of a broader $55 billion pledge to U.S. manufacturing and R&D through 2029.
Will JNJ Continue to Rally?
Looking ahead, several fundamental drivers are positioned to help JNJ sustain its aggressive momentum over the next few quarters.
The company possesses an incredibly robust late-stage clinical pipeline, with its Innovative Medicine segment boasting over 20 novel therapies slated for regulatory filings, along with over 50 product expansions by 2030. This ensures a steady stream of prospective revenue growth.
The accelerating volume of global elective surgical procedures directly feeds the adoption rates of its specialized MedTech robotic systems, which should keep its operational margins elevated.
Together, these factors should continue to boost JNJ’s momentum in the days ahead, with the high end of its price target estimates, offered by 24 analysts, pinned at $298, reflecting an upside of 16% from its current price level, over the short-run.
Why Healthcare ETFs Are the Smarter Play
While JNJ is a powerhouse healthcare stock, pivoting to healthcare ETFs is a highly prudent choice because it offers exposure to the structural growth catalysts of the broader healthcare sector, avoiding the risk of single-stock investment.
Relying exclusively on JNJ exposes investors to localized corporate vulnerabilities, such as its recent multi-billion-dollar talc litigation settlements or the intense biosimilar competition threatening to erode margins on its immunology drug, STELARA.
The stock’s valuation of over 20X forward earnings is considered slightly expensive compared to the industry average of 18.5X.
On the contrary, by choosing an ETF where JNJ sits prominently in the top 10 holdings, an investor can effectively gain from JNJ’s profit while also leveraging the fund’s broader basket to absorb the blow if unexpected pipeline failures occur. Powerful secular tailwinds, such as rapidly aging global demographics and the widespread integration of AI in clinical diagnostics, can insulate investor portfolio from localized corporate missteps of a single stock.
JNJ-Heavy Healthcare ETFs to Buy Now
Considering the aforementioned discussion, investors looking to maximize exposure to JNJ's operational boom through a diversified lens can add the following healthcare ETFs to their portfolio:
iShares U.S. Pharmaceuticals ETF IHE
This fund, with net assets worth $1.43 billion, offers exposure to 56 U.S. companies in the pharmaceuticals sector. JNJ holds the first spot in this fund, with 22.36% weightage, while Eli Lily LLY holds the second spot with 21.71% weightage.
IHE has surged 17.9% year to date. The fund charges 38 basis points (bps) in fees and has traded at a volume of 0.09 million shares in the last trading session. It holds a Zacks ETF Rank #2 (Buy).
State Street Health Care Select Sector SPDR ETF XLV
This fund, with assets under management worth $41.51 billion, offers exposure to 60 companies in the pharmaceuticals; health care equipment and supplies; health care providers and services; biotechnology; life sciences tools and services; and health care technology industries. LLY holds the first spot in this fund with 16.16% weightage, while JNJ holds the second spot with 10.63% weightage.
XLV has risen 4.3% year to date. The fund charges 8 bps in fees and has traded at a good volume of 6.88 million shares in the last trading session. It sports a Zacks ETF Rank #1 (Strong Buy).
Vanguard Health Care Index Fund ETF VHT
This fund, with net assets worth $17.8 billion, offers exposure to 429 companies that manufacture health care equipment and supplies or that provide health care-related services, and companies that are primarily involved in the research, development, production, and marketing of pharmaceuticals and biotechnology products. LLY holds the first spot in this fund, with 13.99% weightage, while JNJ holds the second spot with 8.44% weightage.
VHT has risen 5.5% year to date. The fund charges 9 bps in fees and has traded at a volume of 0.16 million shares in the last trading session. It sports a Zacks ETF Rank #1.
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Johnson & Johnson (JNJ): Free Stock Analysis Report
Eli Lilly and Company (LLY): Free Stock Analysis Report
State Street Health Care Select Sector SPDR ETF ETF (XLV): ETF Research Reports
Vanguard Health Care Index Fund ETF Shares (VHT): ETF Research Reports
iShares U.S. Pharmaceuticals ETF (IHE): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).