Healthcare innovation stocks have been flying recently and, while near-daily mentions of COVID vaccine manufacturers AstraZeneca [AZN], Pfizer [PFE] and Moderna [MRNA] have dominated headlines, there's more to the sector than vaccines.
As an investment theme, healthcare innovation covers companies at the forefront of medical technology development — and it’s a theme receiving serious attention from the investment community.
Last week, Hong Kong-based Ping An Healthcare [1833.HK] gained as much $3.3bn in value after investors began imitating Cathie Wood, CEO of Ark Investment Management, Bloomberg reports. Wood made a $6.8m bet on the healthcare company, triggering a flood of buy orders that drove the stock up 21%.
Our own Thematic ETF Screener backs this up, with the healthcare innovation theme up almost 5% this past month, outpacing the S&P 500’s 1.46% gain in the same period, as of 12 February’s close.
Investors looking for diversified exposure to the healthcare innovation theme might wish to consider ETFs. Here, we profile three of the biggest.
ETFMG Treatments Testing and Advancements ETF
Over the past month, the ETFMG Treatments Testing and Advancements ETF [GERM] has gained circa 18%, making it the best performer in our Thematic ETF Screener’s healthcare innovation theme.
GERM provides exposure to US-listed companies directly engaged in the testing and treatment of infectious diseases. Given this, it's no surprise to see vaccine plays Novavax [NVAX], Moderna and BioNTech [BNTX] among the fund’s top 10 weighted stocks. Novavax is the biggest holding, accounting for over 7% of the fund, while VIR Biotechnology [VIR] is in second place, with its monoclonal antibody in COVID-19 looking for approval in 2021.
Still, GERM isn’t all vaccine plays. Its third place holding is Laboratory Corp. of America Holdings [LH], an S&P 500 company that runs the biggest clinical laboratory network. Over the past month, the stock has gained almost 230% (as of 12 February’s close).
ROBO Global Healthcare Technology and Innovation ETF
The ROBO Global Healthcare Technology and Innovation ETF features 50-100 healthcare technology and innovation companies from around the world, and is offered by ROBO Global. ROBO Global is a firm that researches healthcare and life science companies as part of its robotics, automation and AI investment strategies.
HTEC has gained circa 7% over the past month. Its top holding is Fulgent [FLGT], a provider of genetic testing with a Zacks Equity Research ranking of #1. There's plenty of momentum behind the stock, with its share price surging circa 190% over the past month (as of 12 February’s close).
Second place holding is 3D Systems Corporation [DDD], a manufacturer of 3D printers that offers anatomic models and virtual reality (VR) medical simulators. Over the past month, 3D Systems Corp’s share price has shot up 135% (as of 12 February’s close). However, last month Barron's identified the stock as vulnerable to a short squeeze, which might explain why it's trading above its average analyst share price target.
Global X Telemedic & Digital Health ETF
Telemedicine refers to the practice of treating patients remotely, something we’ll all experience more of in the future. It includes everything from a GP consultation completed via video conferencing to using an app to monitor fitness levels. It’s an area that has grown in importance during the pandemic, as healthcare professionals look to replace face-to-face consultations.
The Global X Telemedic & Digital Health ETF [EDOC] provides access to companies with a high exposure to telemedicine. Up almost 5% over the past month, the fund is dominated by health care companies, which make up 60% of the ETF, followed by the information technology sector accounting for 30% (as of 12 February’s close).
Top holding Nuance [NUAN] offers artificial solutions for physicians and hospitals, alongside AI customer services and security products. Over the past four quarters, the Montreal-based company has topped analyst estimates and has seen its share price climb just under 4% in the past month.
Second place holding Guardant Health [GH] specialises in oncology treatments with a focus on blood tests, data and analytics. In the past month, Guardant is trading up 7% and sitting just below its average analyst price target of $161.89.
Disclaimer Past performance is not a reliable indicator of future results.
CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.
*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.