Healthcare + Tech: Breaking Down DTEC's Winning Formula | ETF Trends

Both the healthcare and technology sectors appear poised for more upside in 2021. With the ALPS Disruptive Technologies ETF (CBOE: DTEC), investors don’t have to choose between the two.

DTEC tracks the Indxx Disruptive Technologies Index, which identifies companies using disruptive technologies across ten thematic areas, including Healthcare Innovation, Internet of Things, Clean Energy and Smart Grid, Cloud Computing, Data and Analytics, FinTech, Robotics, Artificial Intelligence, Cybersecurity, 3D Printing, and Mobile Payments.

The fund offers a ton of technology and healthcare exposure under one umbrella. Right now, that’s a positive trait.

“Healthcare and technology led the U.S. stock market in generating earnings and revenue growth in 2020,” according to BlackRock research. “They also stand out in generating high free cash flow yields and return on equity, as the chart shows. The quality characteristics of these two sectors could help provide some resilience against any bumps along the road to the economic restart, in our view. At the same time, they offer long-term growth potential given structural shifts such as digitalization and aging societies.”

Can DTEC Deliver Again in 2021?

Some other DTEC highlights include industry level diversity, which many traditional rivals lack. The ETF also boasts strong exposure to high-growth themes, including cloud computing and cybersecurity.

“One factor to consider: Rising production costs amid the rewiring of global supply chains – another structural trend reinforced by the pandemic – has made cost-saving technology investment a priority over traditional capex,” according to BlackRock.

DTEC 1 Year Total Return

Additionally, DTEC’s healthcare innovation sleeve offers investors another growth outlet – one ripe with long-term potential.

“We see the healthcare sector potentially benefitting from structural trends such as demographic shifts, emerging market healthcare spending growth and innovation across the board,” adds BlackRock. “For example, telemedicine has gained popularity during the pandemic, and could become a long-term solution for some care needs due to its cost and operational efficiency. We also see the relatively low valuation of the healthcare sector as appealing, and the risk of major policy change in the U.S. appears low given Democrats’ slim majority in the Senate.”

Other technology funds to consider include the Technology Select Sector SPDR ETF (NYSEArca: XLK) and the Fidelity MSCI Information Technology Index ETF (FTEC).

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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.