Moderna Helps This ETF, but It's not the Only Catalyst | ETF Trends

Moderna (MRNA) is one of the biggest stories in the biotechnology space this year because the company is one of the leading contenders to bring a coronavirus vaccine to market. To that point, Moderna stock soared Monday on news that its Covid-19 vaccine is making progress faster than many expected.

However, just 62 ETFs have exposure to the stock and far fewer have notable allocations to the name. One that does is the Principal Healthcare Innovators Index ETF (Nasdaq: BTEC). BTEC’s more than 5% weight to Moderna stock is among the highest among all ETFs.

BTEC tracks the Nasdaq U.S. Healthcare Innovators Index, which is designed to provide exposure to early-stage small-capitalization healthcare companies. These are primarily biotechnology and life science, which have the potential to create cures for cancer, develop new medical technologies, or spearhead other medical advances.

Moderna’s Monday rally help BTEC to a gain of 3.63% on above-average volume, extending a run that has the Principal ETF higher by 19% over the past month.

More Than Moderna

With its positioning at the cusp of healthcare innovation, a theme being spotlighted by the COVID-19 pandemic, BTEC is proving youthful healthcare investments can be served. BTEC, which turns four years old in August, “seeks to tap into the increasing demand for healthcare solutions as demographic trends have driven healthcare spending to more than double in the last 20 years,” according to Principal.

For healthcare ETFs, particularly growthier fare to BTEC, leverage to a single high-flying name is advantageous when that stock is soaring, but it should make investors explore the fund’s underlying thesis. Fortunately, with BTEC, this is much more than a “Moderna ETF.”

“What makes BTEC unique – and potentially potent – is its index’s high bar for inclusion,” according to Nasdaq. “For starters, the Nasdaq Healthcare Innovators Index only includes companies deemed to be research and development ‘intensive.’ This can help investors avoid slow-moving, old school pharmaceuticals companies that are facing patent cliffs or dealing with weak pipelines.”

Additionally, there’s an element of exclusivity for BTEC holdings, one that keeps investors away from financially weak companies and there are plenty of those among smaller biotech outfits.

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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.