The ARK Genomic Revolution Multi-Sector Fund (CBOE: ARKG) is already trouncing basic biotechnology and healthcare ETFs and historical data suggest that even if a recession lingers, ARKG could prove durable.
SVB Leerink analyst Geoffrey Porges recently pointed out in a note to clients that biotechnology and pharmaceutical benchmarks topped the broader market during the 2001 recession, the global financial crisis, and during the current economic malaise.
“On average, the biotechnology Indexes declined -1% during the three economic downturns, compared with the pharmaceutical index’s -10% and the S&P 500 index’s -20%,” reports Josh Nathan-Kazis for Barron’s.
Impressive Track Record
ARKG is a credible long-term investment. Over the past three years, the fund is up nearly 105% or more than triple the returns of the Nasdaq Biotechnology Index over the same span. During that period, the ARK fund more than doubled the aforementioned S&P 500 Health Care Index
Some predictable catalysts explain ARKG’s potential durability in a recession.
“People need their medicine, even in a recession. Porges cited published papers showing that pharmaceutical sales volume stayed steady in the U.S. during the 2008-09 recession,” according to Barron’s.
The ARK Investment team’s process tries to focus on innovation and takes advantage of market inefficiencies. For example, the market easily can be distracted by short-term price movements, losing focus on the long-term effect of disruptive technologies.
“Genomic sequencing is changing the way biological information is collected, processed, and applied. ARKG is focused on the disruptive innovations that are increasing precision, restructuring health care, agriculture, pharmaceuticals, and enhancing the quality of life,” according to ARK Invest.
The ARK Investment team’s process tries to focus on innovation and takes advantage of market inefficiencies. For example, the market easily can be distracted by short-term price movements, losing focus on the long-term effect of disruptive technologies.
Related: Big Growth Awaits a Golden Genomics ETF
“Our analysis of historical recessions suggested that the biotech and pharma indices (and stocks) significantly outperformed the broad market (S&P 500), despite the greater P/E multiple compressions in the healthcare indices,” writes SVB’s Porges.
ARKG also offers some of the best CRISPR exposure of any ETF on the market. CRISPR-based innovations to accelerate given the technology’s ease of use, cost-efficacy, a growing body of research surrounding its safety and AI-powered CRISPR nuclease selection tools. CRISPR could also be utilized to address some of the most prominent healthcare problems, which opens up a significant investment opportunity in monogenic diseases.
For more on disruptive technologies, visit our Disruptive Technology Channel.
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.