Investors often think of healthcare as a slower-moving, defensive sector. To an extent, that’s true, but as technological innovation permeates various industries and sectors, healthcare is becoming a hotbed of disruptive growth unto itself.
Investors looking for exchange traded funds levered to that theme may want to evaluate the Goldman Sachs Future Health Care Equity ETF (GDOC). GDOC is a departure from its established, older counterparts in the healthcare ETF category.
Many of those funds are passive and cap-weighted, meaning that they’re heavily allocated to blue-chip pharmaceutical companies and mature biotechnology firms. That methodology is useful for investors seeking defensive and value traits coupled with steady equity income. However, many of those ETFs aren’t adequately exposed to healthcare growth engines.
GDOC flips that script. The Goldman Sachs ETF is actively managed, confirming that its managers can react swiftly to emerging healthcare trends, including genomics and telemedicine, among many more.
“Over the last few decades, technological advancements in the health care industry have driven an unprecedented amount of innovation,” noted Goldman Sachs Asset Management (GSAM). “We believe the industry is now at a key inflection point, as cost curves have declined so dramatically that many of these new treatments and solutions are commercially scalable.”
In other words, there are elements of Wright’s Law on display in the healthcare arena today. Wright’s Law states that as production efficiencies increase, costs decline, potentially benefiting companies along the way. That includes purveyors of disruptive concepts. Most importantly, technological advancements coupled with declining costs in the healthcare sector creates winning scenarios for multiple stakeholders, including clinicians, patients, and investors.
“These advances are changing health care for the better – through greater access, improved outcomes and lower costs – which is a win for all,” added GSAM.
GDOC, which debuted last November, holds 57 stocks. While that’s a concentrated lineup relative to old guard healthcare ETFs, the GDOC roster — in a testament to the benefits of active management — does an admirable job of reaching well into the healthcare ecosystem.
GDOC’s lineup features pharma, biotech, and medical device makers. It even holds a small number of pure-play tech stocks with direct inroads to healthcare. That breadth confirms GDOC’s utility as a compelling avenue for investors looking to access new frontiers of healthcare growth.
“Over the next decade, we believe the health care industry will evolve from reactive medicine to a focus on preventative medicine, potentially leading to more affordable solutions, faster recovery times, personalized treatments and earlier detection,” concluded GSAM.
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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.