IPOs Are Back. Get In On the Action with the BBH ETF

2020 saw a lot of initial public offerings (IPOs) put on hold thanks to Covid-19. Now that a global vaccine rollout is underway, biotech IPOs are hitting the markets and boosting the VanEck Vectors® Biotech ETF (BBH).

“Biotechnology companies continue their race to the public equity markets. Seven companies, all in the biotech or health-care space, made their trading debuts Friday (February 5),” a Barron’s article said.

The fund seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MVIS® US Listed Biotech 25 Index (MVBBHTR), which is intended to track the overall performance of companies involved in the development and production, marketing, and sales of drugs based on genetic analysis and diagnostic equipment.

Overall, BBH offers investors exposure to:

  1. Highly Liquid Companies: The index seeks to track the most liquid companies in the industry based on market cap and trading volume.
  2. Industry Leaders: The index methodology favors the largest companies in the industry.
  3. A Global Scope: BBH may include both domestic and U.S. listed foreign companies, allowing for enhanced industry representation.

BBH is up 39% the past year and 15% so far in 2021.

BBH Chart

Momentum is strong for BBH, as its technical indicators confirm. First up, there’s the relative strength index (RSI) that shows a 72.57 reading, firmly at overbought levels.

Using the moving average convergence divergence (MACD) indicator, the exponential moving average (EMA) is above the signal line. Additionally, BBH is about 10% above its 50-day moving average.

BBH Chart

BBH Holdings Poised to Thrive

About 23% of BBH’s holdings consist of Amgen, Gilead Sciences, and Novavax. The latter has been on a tear so far this year, rising about 190%.

“Novavax (NVAX) was the coronavirus stock to hold last year, as the company punched far above its weight and delivered investors incredible returns,” a TipRanks article published in Yahoo! Finance noted. “The small vaccine player took the good fight to Covid-19, with its vaccine candidate NVX-CoV2373, and proved it could go toe-to-toe with the pharma giants. The momentum has progressed into 2021, too, and shares are already up this year by a massive 190%.”

“As a result of the regulatory updates and manufacturing agreement with Canada, we are increasing the number of doses that we project Novavax will sell in 2021 and beyond as visibility on potential EUAs increases,” said Cantor analyst Charles Duncan. “We believe our estimates are conservative as the company has entered a number of manufacturing agreements and has guided that by mid’21 it will have the capacity to manufacture 2B doses annually.”

AMGN Chart

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