The Principal Healthcare Innovators Index ETF (BTEC) became quite the story among healthcare exchange traded funds last year.
BTEC seeks to provide investment results that closely correspond, before expenses, to the performance of the Nasdaq Healthcare Innovators Index.
Under normal circumstances, the fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities of companies that compose the index at the time of purchase. The index uses a quantitative model designed to identify equity securities in the Nasdaq US Benchmark Index (including growth and value stock) that are small and medium capitalization U.S. healthcare companies.
Some good news for investors? The case for BTEC remains in its early innings.
“Healthcare and technology led the U.S. stock market in generating earnings and revenue growth in 2020,” according to BlackRock research. “They also stand out in generating high free cash flow yields and return on equity, as the chart shows. The quality characteristics of these two sectors could help provide some resilience against any bumps along the road to the economic restart, in our view. At the same time, they offer long-term growth potential given structural shifts such as digitalization and aging societies.”
Why BTEC Is Still a Sound Bet
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 in fact thrive. BTEC 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.
Healthcare technology has come to the fore, offering various innovations to combat the coronavirus. This can only help fuel healthcare technology ETFs, which are moving forward from preventative medicine to treatment.
Indeed, BTEC boasts plenty of digital healthcare tailwinds.
“We see the healthcare sector potentially benefitting from structural trends such as demographic shifts, emerging market healthcare spending growth and innovation across the board,” adds BlackRock. “For example, telemedicine has gained popularity during the pandemic, and could become a long-term solution for some care needs due to its cost and operational efficiency. We also see the relatively low valuation of the healthcare sector as appealing, and the risk of major policy change in the U.S. appears low given Democrats’ slim majority in the Senate.”
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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.