Investors looking disruptive and innovative growth concepts often hone in on the communication services and technology sectors, and rightfully so, but they’d do well to add healthcare to that mix.
In fact, healthcare is one of the epicenters of disruptive growth and innovation — themes that some exchange traded funds tap into. Add the Goldman Sachs Future Health Care Equity ETF (GDOC) to that group. GDOC, which is actively managed, debuted Thursday along with the Goldman Sachs Future Consumer Equity ETF (GBUY) and the Goldman Sachs Future Real Estate and Infrastructure Equity ETF (GREI), adding new heft to Goldman’s growing suite of innovative ETFs.
GDOC fits the bill as an important new ETF because the healthcare sector is evolving in rapid fashion, and the evolution is about much more than vaccine innovation stirred by the ongoing coronavirus pandemic.
“Technological advancements and declining costs are driving an unprecedented amount of innovation – and disruption – within healthcare. We believe this presents a unique wealth creation opportunity for investors,” according to Goldman Sachs.
Home to 63 stocks, GDOC has the growth feel that an investor would expect from a disruptive healthcare strategy. For example, GDOC’s price-to-earnings ratio is 39.60x and its price-to-book ratio is 8.18x, according to issuer data. Those are multiples indicative of a growth-heavy lineup. However, GDOC augments some of that growth bias with allocations to blue-chip pharmaceuticals names, such as Eli Lilly (NYSE:LLY) and AstraZeneca (NYSE:AZN).
Still, GDOC presents investors with a cutting-edge approach to healthcare investing, as Goldman Sachs focuses on companies to include in the new fund that it “believes are driving innovation in healthcare, by developing either new treatments or new technologies, primarily in the fields of genomics, precision medicine, technology-enabled procedures and digital healthcare.”
In the case of genomics, that’s long been viewed as a healthcare growth frontier, but it’s still in the early innings of that growth. Adding to the case for genomics exposure, companies in this space are involved with developing products aimed at early detection of major diseases and next generation DNA sequencing (NGS), among other high-growth concepts.
GDOC’s telemedicine exposure is compelling as well. While many market participants view telemedicine as a result of the pandemic, the fact is that it was growing before the health crisis and its long-term outlook is bright, thanks to aging populations and the need for better healthcare services in developing economies.
“The coronavirus crisis also accelerated innovation in healthcare services, particularly in telemedicine and in-home care. A six-fold increase in the use of telemedicine services in the first half of 2020 is just the start of what we see as an enduring trend. Hospitals and physicians are increasingly investing in telehealth capabilities, and consumers are warming to this model of care. We see ample room for further adoption after what had been a slow start prior to the pandemic,” according to BlackRock research.
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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.