The time to buy, regardless of sector, is usually when a particular group falls out of favor, not when it has been bid higher by scores of investors. Some investors view that as the case with the broader healthcare group and biotechnology in particular.
Multiple factors, including politics, are pressuring biotech stocks and ETFs this year. Election year posturing over drug prices represents a significant headwind for the healthcare sector and that is something biotech ETFs like IBB have already proven vulnerable to. Just go back to September 2015 and refer to Hillary Clinton’s Twitter feed.
Investors who are closely watching the presidential race will want to keep an eye on Clinton in the coming months. If Clinton makes her way to the Oval Office and implements more regulation on pharmaceutical drug pricing, biotech companies may underperform the broader market.
Biotechnology ETFs should also prove immune to hawkish changes in Fed policy. A recent study by Deutsche Bank indicates major biotech indexes have negative correlations to changes in 20-year U.S. government bonds. Looking ahead, in the years through 2024, spending growth is projected to average 5.8% and peak at 6.3% in 2020.
[related_stories]With healthcare earnings season coming up, health care stocks could be one of the few bright spots in the markets and exchange traded funds that track the sector could lead ahead.
Based on a percentage of “Buy” ratings at the end of March, analysts are most optimistic on the health care sector, according to FactSet. About 61% of analysts had a Buy rating on health care at the end of the first quarter.
Plus, biotech ETFs are showing signs of life. Below is a list of biotech ETFs with which investors can play the group’s resurgence.
Legacy Biotech ETFs
- iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB)
- SPDR S&P Biotech ETF (NYSEArca: XBI)
- First Trust NYSE Arca Biotechnology Index Fund (NYSEArca: FBT)
- Market Vectors Biotech ETF (NYSEArca: BBH)
- PowerShares Dynamic Biotech & Genome (NYSEArca:PBE)
New Generation Biotech ETFs
- ALPS Medical Breakthroughs ETF (NYSEArca: SBIO)
- BioShares Biotechnology Products Fund (NasdaqGM: BBP)
- BioShares Biotechnology Clinical Trials Fund (NasdaqGM: BBC)
- Loncar Cancer Immunotheraphy ETF (NasdaqGM: CNCR)
- ARK Genomic Revolution Multi-Sector Fund (NYSEArca: ARKG)
Inverse and Leveraged Biotech ETFs
- Direxion Daily S&P Biotech Bull Shares (NYSEArca: LABU)
- UltraPro NASDAQ Biotechnology (NasdaqGM: UBIO)
- ProShares Ultra Nasdaq Biotechnology (NasdaqGM: BIB)
- Direxion Daily S&P Biotech Bear Shares (NYSEArca: LABD)
- ProShares UltraPro Short NASDAQ Biotechnology (NasdaqGM: ZBIO)
- ProShares Ultrashort Nasdaq Biotechnology (NasdaqGM: BIS)
- Direxion Daily S&P Biotech Bear 1X Shares (NYSEArca: LABS)
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