Teladoc Takes Flight, Boosting This Disruptive Healthcare ETF

The J.P. Morgan healthcare conference is underway and the confab often viewed as the super bowl of healthcare meetings is already delivering some notable headlines for investors. The conference effect is also being felt by investors in ETFs, such as the ARK Genomic Revolution Multi-Sector Fund (CBOE: ARKG).

ARKG gained more than 1% Monday after getting some help from Teladoc Health (NASDAQ: TDOC), which posted a double-digit intraday gain after the company said it’s acquiring InTouch Health Services for $600 million.

“‘Today marks a bold leap forward in Teladoc Health’s mission to transform how high-quality healthcare is accessed and experienced, making virtual care available for patients with even the most critical care needs,” said Teladoc CEO Jason Gorevic in a statement. “Bringing these companies together will make Teladoc Health the clear virtual care leader across every front door of healthcare, further accelerating the adoption and impact of virtual care for millions of people around the world.”

Why It’s Important

The Teladoc acquisition and subsequent share-price surge is relevant to ARKG investors because just 62 ETFs hold shares of the company and only two of those funds have larger weights to the stock than the 3.83% ARKG devotes to it.

“The deal, announced Sunday, pushes Teladoc into a competition to provide hospitals and other health-care providers with telemedicine tools. The company has previously focused on selling health insurers telemedicine services for their clients to use,” reports Josh Nathan-Kazis for Barron’s.

ARKG’s Teledoc exposure underscores the benefits of the fund’s active management style. As a mid-cap stock in a sector dominated by large-cap names, it’s not surprising that many traditional index-based healthcare features scant Teledoc exposure. However, ARK’s management team found an opportunity with the name, making it ARKG’s ninth-largest holding.

Related: Healthcare, Technology ETFs for Dividend Growth Opportunities 

ARKG includes companies that merge healthcare with technology and capitalize on the revolution in genomic sequencing. These companies try to better understand how biological information is collected, processed and applied by reducing guesswork and enhancing precision; restructuring health care, agriculture, pharmaceuticals and enhancing our quality of life.

Teladoc’s deal “announcement comes at a time when demand for virtual care services within the provider market is poised for significant growth, as favorable reimbursement tailwinds increasingly equip hospitals and health systems to fully realize the value of virtual care,” according to the company. “According to 2019 JPMorgan research, 40% of hospitals surveyed reported planning to increase their budgets for telemedicine solutions. With 61% of hospital revenue forecasted to come from managed and value-based care models by 2021, (L.E.K. 2018 Hospital Study Survey), virtual care will be a crucial strategy to improve consumer engagement, ensure consistent quality and manage health care’s rising costs.”

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.