Due in large part to the J.P. Morgan Health Care conference in San Francisco, the biotechnology industry’s marquee yearly confab, January is often a strong month for related equities and ETFs.
That conference can serve as a springboard for mergers and acquisitions activity and with the genomic space currently in the spotlight, an uptick in consolidation in that arena could benefit the Global X Genomics & Biotechnology ETF (Nasdaq: GNOM).
GNOM tracks the Solactive Genomics Index and “seeks to invest in companies that potentially stand to benefit from further advances in the field of genomic science, such as companies involved in gene editing, genomic sequencing, genetic medicine/therapy, computational genomics, and biotechnology,” according to Global X.
Companies are only eligible for inclusion if they generate at least 50% of their revenues from genomics related business operations. The index is market cap-weighted with a single security cap of 4.0% and a floor of 0.3%. The ETF provides exposure to CRISPR, gene editing and therapeutics companies. CRISPR, in particular, is an area to watch.
“January is disproportionately represented both by a number of deals and dollar value over the past 5 years,” Evercore ISI analyst Josh Schimmer wrote in a note out Wednesday morning,” reports Josh Nathan-Kazis for Barron’s. “January has seen as high as 33% of a year’s total deals (5/15 in Jan 2018) and as high as 48% of a year’s total dollar value ($36bn/$76bn in Jan 2017).”
GNOM tries to help investors take on a thematic multi-capitalization exposure to innovative elements that cover advancements in gene therapy bio-informatics, bio-inspired computing, molecular medicine, and pharmaceutical innovations. These advancements can also translate over to growth potential, potentially providing investors with long-term alpha with low correlation relative to traditional growth strategies.
“Entering 2020, will companies look to keep their heads down with modest guidance?” Schimmer wrote,” according to Barron’s. “If so, we might see another choppy month, although the macro setup is quite different this time around with expectations around conservative price hikes already in sentiment.”
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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.