If there’s one benefit emerging from the coronavirus crisis, it’s that renewed emphasis is being placed on healthcare innovation, a theme accessible via the Principal Healthcare Innovators Index ETF (Nasdaq: BTEC).
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.
BTEC is higher by almost 18% over the past month, putting it in a pantheon with biotechnology funds that have been soaring. In fact, BTEC is one of the best-performing healthcare ETFs this year that’s not a dedicated biotechnology fund.
Investing in Innovation
BTEC is benefiting from increased demand and its growth purview at a time when investors are embracing the latter in the healthcare sector.
“Healthcare has been the best-performing sector since the U.S. market peaked in February,” according to ClearBridge Investments. “This is reasonable because 1) the underlying demand for a large proportion of healthcare goods and services, particularly biopharmaceuticals, has not changed and 2) the political outlook for the sector has potentially improved with the exit of Bernie Sanders from the Democratic presidential race.”
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.
Importantly, BTEC’s run may not be over yet. In fact, it could just be getting started.
“Overall, we believe healthcare can maintain market leadership due to non-cyclical earnings durability, a return to valuations that reflect limited pipeline success, and the potential for the industry to deliver health technologies to end the COVID-19 crisis,” notes ClearBridge.
Another reason to consider mature healthcare companies, including those found on BTEC’s roster: they have few, if any, unprofitable quarters, and they have a cash hoard on their balance sheets to buffer against economic contractions and rough markets. The coronavirus pandemic put healthcare exchange-traded funds (ETFs) in the forefront as medical providers are an essential component in the global market landscape. However, investors shouldn’t suck up any and all health care ETFs in sight like a robotic vacuum because not all are created equal.
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