With significant tailwinds by way of the coronavirus pandemic, the Principal Healthcare Innovators Index ETF (Nasdaq: BTEC) is a rising star among healthcare ETFs. Fortunately, the long-term outlook for the Principal ETF is compelling, too, indicating it can thrive when the virus is finally defeated.
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.
As the recent news of an $18.5 billion between Teladoc and Livongo Health confirms, there’s momentum for consolidation in telemedicine, one of BTEC’s industry exposures.
“Health tech companies tend to be wary of deals because of previous struggles for large deals, but the industry could be ripe for further consolidation, said Stephanie Davis, a research analyst at SVB Leerink,” reports Jesse Pound for CNBC.
Timing Is Right
Since the coronavirus outbreak, health care technology has come to the fore with various innovations to combat the virus. This can only help fuel health care technology exchange-traded funds (ETFs) moving forward from preventative medicine to treatment.
Amid the Covid-19 pandemic, there’s been a heavier reliance on technology, including the internet of things to facilitate communications amid social distancing and lockdown measures. However, it’s also positively impacting the way medical services are delivered with more advanced technology.
“Other deals in this space could follow the pattern of this one, with companies buying players in different slices of the industry to broaden their total offerings, Davis said,” according to CNBC.
In other words, more telemedicine consolidation could be a catalyst for BTEC going forward. BTEC’s Teledoc exposure underscores the benefits of the fund’s active management style. As a mid-cap stock in a sector dominated by large-cap names, it’s not surprising that many traditional index-based healthcare features scant Teledoc exposure.
“In some ways, the health technology space mirrors financial technology space of the past decade, where smaller companies acquired and grew while legacy companies in adjacent industries tried to decide whether to partner, purchase or build their own systems in-house,” according to CNBC.
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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.