Stocks were flat to start the day as investors awaited Fed Chair Jerome Powell’s testimony before Senate later today. Market watchers will be looking for further clues about the central bank’s current views on the speed of its policy tightening.
“Historically, the stock market has suffered some nasty ‘temper tantrums,’ and numerous rate hikes eventually led to recessionary bear markets,” said Jim Paulsen, chief investment strategist at the Leuthold Group. “However, the current focus among investors may be misplaced. The stock market’s response may have less to do with timing and number of rate hikes than it does with the direction of real earnings.”
One area of the market that stocks can be found to produce 10x, even 20x returns, regardless of what’s happening elsewhere, is biotech. Looking at the performance of the past ten years, if the biotechnology industry were a sector, it would be the best performing one. Over the past decade, biotech stocks have returned 524%. That beats every last sector, it beats the broader health care sector by 200 percentage points, and it’s nearly double the S&P 500’s total return in that same time frame.
There’s clearly money to be made in the discovery of new treatments for anything from the flu to cancer. But biotech stocks carry substantial risk. While positive data from a drug trial could send their stocks soaring, a setback or failure can crush their returns, making them difficult buy-and-hold investments.
We’ve got the answer for those looking for a long-term investment in biotech with less risk.
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Instead of betting on individual drugs or companies, an ETF allows you to spread out risk across dozens or even hundreds of firms at a time. The Principal Healthcare Innovators ETF (BTEC) is a promising fund geared toward finding smaller, innovative companies that might get overlooked, focusing on active investment in early-stage R&D.
BTEC seeks out health care firms from the Nasdaq US Benchmark Index but excludes the top 150 securities by market size while excluding companies with low trading liquidity. How it identifies “innovators,” however, might seem a little unorthodox: Specifically, it seeks out “non-earners by means of having negative earnings over the prior 4, prior 8 or future 4 quarters at least half of the time.” In other words, it selects companies with inconsistent or negative profits, the idea being that, for now, they’re pouring every last cent into R&D.
BTEC then picks the best-ranked 150 to 200 companies based on its scoring measures, then weights those stocks by size, with no stock exceeding 3% in rebalancing, which happens twice a year. At the moment, Moderna is the top, holding at 5.2% of assets by virtue of its gains since the last rebalancing. Moderna, currently best-known for its COVID-19 vaccine candidate, was founded to build a large pipeline of drugs using messenger RNA technology.
- Net Assets — $101.1 million
- Yield — 0.00%
- Expense Ratio — 0.42%
BTEC also holds BioMarin Pharmaceutical (BMRN), Seattle Genetics (SGEN), and Exact Sciences (EXAS), among others.
Where to invest $1,000 right now...
Before you consider buying BTEC, you'll want to see this.
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And it's not BTEC.
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But you have to act now, because a catalyst coming in a few weeks is set to take this company mainstream... And by then, it could be too late.
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TRUE MARKET INSIDERS:
Warning: Move Your Money ASAP
The clock just started on the biggest stock market event in twenty years. And the next couple months could determine who will become extremely wealthy in 2022 – and who won’t. [Full Story…]