Healthcare is often viewed as a defensive sector, but as the group evolves, so does that reputation. These days, the sector is home to plenty of disruption and innovation, traits that are accessible with various next-generation ETFs, including 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, 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 Prinicpal.
Disruptive technology is not relegated to certain sectors as it will permeate into all industries in some form or fashion. For example, augmented reality is technology comprised of digital images superimposed over the real world, and its use is primed to drive industry growth–industries like real estate and manufacturing are already putting the technology to use in a variety of ways.
Betting on BTEC
While a traditional healthcare ETF is likely to be classified as large-cap blend or value fund, BTEC is a mid-cap growth fund and its 183 holdings have an average market capitalization of just under $4 billion. None of those holdings exceed weights of 5.12%.
Importantly, BTEC is a passive fund with an active index structure, one that removes large-cap and less liquid companies as well as those with inconsistent or negative earnings trends. Conversely, BTEC focuses on research and development-focused firms that have the potential to deliver legitimate disruption.
The future of healthcare looks more technologically driven as the industry shifts into the digital age from old analog equipment, developing early detection and prevention, with robotics or artificially assisted technicians.
BTEC “invests in companies that are leading the charge toward innovative solutions, rather than spending money on marketing and distribution,” according to Principal.
BTEC is overweight healthcare equipment and supplies, biotechnology, life sciences tools, healthcare technology, and technology hardware companies, so the fund is less focused on areas like pharmaceuticals, equipment, supplies, providers, and services.
BTEC charges 0.42% per year, or $42 on a $10,000 investment. The innovative ETF is up almost 10.40% over just the past week.
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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.