Many thematic ETFs are alpha-seeking instruments, but that doesn’t mean they’re all bereft of defensive traits. The Global X Longevity Thematic ETF (Nasdaq: LNGR) emphasizes demographic shifts benefiting the healthcare sector is and is higher by more than 24% this year.
LNGR tracks the Indxx Global Longevity Thematic Index. The ETF “seeks to invest in companies positioned to serve the world’s growing senior population through exposure to health care, pharmaceuticals, senior living facilities and other sectors that contribute to increasing lifespans and extending quality of life in advanced age,” according to Global X.
LNGR is at the forefront of seismic demographic shifts, in part explaining its bullishness this year.
“In 2019, the number of seniors 65 and older surpassed the number of children five and younger, representing a significant change in global demographics,” said Global X in a recent note. “As the population ages, it puts an increasing strain on the health care system in areas like health care products and services, medical devices, senior homes, as well as biotechnology and pharmaceuticals.”
Biotechnology and pharmaceutical stocks combine for 43% of LNGR’s weight while medical device makers represent the largest industry allocation at almost 36%.
“Biotech and pharmaceutical firms may also be immune to the impact of downturns given the nondiscretionary characteristics of their products. Valuations of these firms depend primarily on the success of a drug or device, and its addressable market, rather than cyclical factors,” according to Global X.
LNGR Defense
As noted earlier, LNGR could be steady even if the economy slows next year.
“And even if the economy slows, these health-related industries could remain insulated as insurers and governments shoulder most of the associated costs,” notes Global X. “For perspective, employment in the health care sector has increased for more than 40 years regardless of the business cycle.”
Other data points indicate LNGR has potentially long-standing tailwinds.
“The Bureau of Labor Statistics (BLS) believes the health care sector will likely to continue to grow employment until at least 2026, mainly because of the aging of US population,” according to Global X.
While health care is often viewed as a defensive sector suitable for conservative investors, the industry is shifting. It features myriad growth opportunities, many of which are not adequately reflected by some traditional healthcare funds. LNGR can be a complement to standard health care ETFs and help tactical investors tap into some of the growth-ier corners of this important sector.
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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.