Stocks sank in early trading following last week’s decline. Investors are grappling with surging infection rates and an upcoming shift in Fed policy as the winter holiday season approaches. Reopening trades were the biggest losers once again in pre-market trading. High-priced tech stocks also continued to bleed.
“On the one hand, corners of the market are oversold,” Adam Crisafulli, founder of Vital Knowledge, said in a note. “However, the aggressive ‘buy the dip’ mentality, which proved so profitable for the last 1.5+ years, especially in high-multiple corners of the market, was underwritten by a tidal wave of stimulus that is now receding.”
Some investors are holding onto hope for a Santa Claus rally into the year’s end, but we’ve found a ticker that has significant potential for success, regardless of what’s happening elsewhere in markets.
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Many biotech companies are reasonably small startups. This means if a successful product is developed (then revenues, then earnings), share prices can skyrocket. This can happen regardless of headwinds and hurdles that could arise for the overall market.
However, many investors who come to the biotech space to cash in on solid returns get burned by seemingly promising startups that only end up wasting investor capital in dead-end technologies. One solution for investors looking to gain access to companies at the forefront of innovation through a diversified basket of biotech names is the First Trust NYSE Arca Biotechnology ETF (FBT).
FBT gives exposure to the best in biotech through its focused yet diversified list of 30 names, including giants such as Moderna (MRNA) and $5 billion Alkermes PLC (ALKS). Without a specific sector classification scheme, the fund’s broad exposure could include access to pharmaceuticals and medical technology in addition to traditional biotech.
FBT is one of a handful of biotech ETFs available, offering exposure to a corner of the market that can perform well during periods of consolidation and is capable of big jumps in the event of major drug approvals. Though its equal-weighted methodology ensures that assets are balanced across all components, FBT’s portfolio is somewhat limited. That feature can be vital in the biotech space, where specific companies can turn in significant gains over short periods.
First Trust NYSE Arca Biotechnology ETF (FBT) Data Summary
- Weighted Average Market Cap $30.19B
- Price / Earnings Ratio 44.72
- Price / Book Ratio 4.71
- YTD Daily Total Return -5.8%
- Yield 0.00%
- Expense Ratio 0.55%
- Net Assets 1.93B
- Number of Holdings 30
- Top Holdings BioNTech (BNTX), Alkernmans (ALKS), Moderna (MRNA)
Where to invest $1,000 right now...
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