Healthcare is one of the sectors that’s outperforming this year and while much of that is attributable to the coronavirus pandemic, plenty of market observers believe a new bull market for the sector is afoot – one that could last for years.
In other words, the new healthcare bull market is young and as such, investors may want to consider fresher approaches to the sector, 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.
“Health care is poised to become one of the most exciting sectors for many years to come,” reports Andrew Addison for Barron’s. “The sector is outperforming stock-market indexes globally, not just in the U.S. And for good reasons.”
BTEC Benefits
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. Over the past week, the Principal is higher by 5.39%, a move that’s pumped the fund’s one-month gain to north of 28%.
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.
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.
“As the world cries out for a successful treatment for Covid-19, we can expect to see more money allocated to health care,” according to Addison. “The pandemic has taught us that the entire world needs to have large stockpiles of medicines, ventilators, and other crucial equipment, as well as basic treatment and examination tools such as swabs and masks.”
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.
For more on multi-factor strategies, visit our Multi-Factor Channel.
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.