Like crosstown rivals in sports, growth and value have been duking it out for factor investing supremacy in the extended bull run. One specific sector, however, should be on investors’ radars as the growth-value battle rages on—health care.
“Market breadth is extremely strong across all equities,” said Christian Fromhertz, founder and CEO of Tribeca Trade Group on CNBC’s “Trading Nation.” “And what we’re seeing … in health care is, really, the group is starting to fire on all cylinders.”
Health care ETFs have been exhibiting strength as of late whether they skew towards value or growth.
“The whole group is starting to shift up,” Fromhertz said. “What I like about the ETF … [is]it captures both value and growth in there. So, really, as we’re seeing a see-saw back and forth between the two, I think this is a great way to play it.”
One thing to watch is the upcoming 2020 elections, which could affect the winning candidates’ views on health care. U.S. President Donald Trump, for example, made reducing health care costs part of his campaign prior to winning the 2016 Election.
“That’s the biggest risk when you talk about health care and biotech, because they tend to move together,” he said. “I think the option trade is the right way to play [it]. This way, you’re limited to the downside by the premium that you’re investing in the trade.”
Relative ETFs to Trade
ETFs to play include the Direxion Russell 1000 Growth Over Value ETF (NYSEArca: RWGV) and the Direxion Russell 1000 Value Over Growth ETF (NYSEArca: RWVG). For investors looking for continued upside in growth-oriented equities over value-oriented equities, RWGV offers them the ability to benefit not only from growth opportunities potentially performing well, but from their outperformance compared to value.
RWVG seeks investment results that track the Russell 1000® Value/Growth 150/50 Net Spread Index (the “index”). The fund, under normal circumstances, invests at least 80% of its net assets (plus borrowing for investment purposes) in securities that comprise the Long Component of the index or shares of exchange-traded funds (“ETFs”) on the Long Component of the index.
RWGV measures the performance of a portfolio that has 150% long exposure to the Russell 1000® Value Index (the “Long Component”) and 50% short exposure to the Russell 1000® Growth Index (the “Short Component”). On a monthly basis, the Index will rebalance such that the weight of the Long Component is equal to 150% and the weight of the Short Component is equal to 50% of the Index value.
For more relative market trends, visit our Relative Value Channel.