Healthcare stocks have moved in lockstep with the broader market pullback this year. Eli Lilly (LLY) , the largest U.S. healthcare company by market capitalization, has fallen 15.6% year to date, making it a key drag on the sector.
Despite the intense focus on Lilly, the risks tied to its hyper-concentrated growth strategy are hard to ignore. For most investors, betting on a single stock may be less prudent than gaining exposure to the broader healthcare industry through a low-cost ETF.
Lilly’s product portfolio spans Alzheimer’s disease, autoimmune disorders, diabetes, and obesity, among other areas. But the real engine behind its financial performance and stock price has narrowed to its GLP-1 franchise: Mounjaro (for type 2 diabetes) and Zepbound (for chronic weight management).
In 2025, the two drugs together accounted for 56% of Lilly’s total revenue, a sharp increase from 36.7% in 2024. Strong growth, however, comes with heightened concentration risk. That leaves Lilly more exposed to pricing pressure, competitive threats, and potential regulatory shifts from the FDA—all concentrated in a single drug category.
On valuation, Lilly currently trades at a trailing price-to-earnings ratio of 40.1. While the forward P/E (which factors in high growth expectations) is a more moderate 26.1, the market’s premium hinges squarely on the company’s dominant position in the weight-loss drug space. If demand holds up, today’s valuation may eventually look like a bargain. But a cyclical slowdown or the emergence of a superior alternative could pressure both earnings and the stock.
For investors looking to avoid overconcentration in a single name, the Vanguard Healthcare ETF (VHT) offers a more balanced alternative.
The fund holds more than 400 stocks spanning biotech, pharmaceuticals, medical devices, and health insurers. Notably, Eli Lilly is VHT’s top holding, accounting for 12.6% of the portfolio. That means the ETF allows investors to participate in Lilly’s growth in the weight-loss market while spreading risk across a broad range of healthcare names.
From a valuation and cost perspective, VHT trades at a P/E of 25.3 and offers a dividend yield of 1.6%, comparing favorably to the Vanguard S&P 500 ETF (25.8 P/E, 1.1% yield). The fund’s expense ratio is just 0.09% —significantly lower than the average actively managed fund.
Eli Lilly remains a high-quality pharmaceutical leader with strong competitive advantages. For growth-oriented investors willing to accept concentrated risk, the stock could still be a compelling choice. But for those seeking to capture the broader growth trajectory of the weight-loss drug industry while reducing single-stock volatility, a low-cost, well-diversified ETF like VHT may offer a more compelling risk-reward profile.
