Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

In The Search For A COVID Cure, Biopharma ETFs May Keep Your Portfolio Healthy

By Investing.com (Tezcan Gecgil/Investing.com )ETFsJul 17, 2020 04:41AM ET
www.investing.com/analysis/in-the-search-for-a-covid-cure-biopharma-etfs-may-keep-your-portfolio-healthy-200531014
In The Search For A COVID Cure, Biopharma ETFs May Keep Your Portfolio Healthy
By Investing.com (Tezcan Gecgil/Investing.com )   |  Jul 17, 2020 04:41AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Over the past several months healthcare has become a top priority for individuals and governments alike around the globe. Many now regard a potential drug, or a vaccine, as a fast-track to a 'normal' life. As a result, so far this year, shares of a large number of biotechnology and pharmaceutical, or biopharma, stocks have done quite well. 

There is also a wide range of exchange-traded funds (ETFs) that allow market participants to invest in biopharma in a diversified manner. Today we'll first discuss the industry's general characteristics and then introduce an ETF that may deserve further due diligence.

The biopharma industry offers growth prospects

According to the US Food & Drug Administration (FDA), a drug patent lasts for 20 years. But about half of that time is, in general, spent developing the drug. 

As the COVID-19 pandemic has shown, research and development is at the center of drug development. In the US, developing a new prescription medicine is likely to cost well over $2 billion. The global pharmaceutical industry's annual investment in R&D is around $150 billion a year.

Since March, investors have not hesitated to buy the shares of a range of biopharma companies that have joined the race for a cure against the novel coronavirus. Several of these firms include AstraZeneca (NYSE:AZN), Gilead Sciences (NASDAQ:GILD), GlaxoSmithKline (NYSE:GSK), Ibio (NYSE:IBIO), Inovio Pharmaceuticals (NASDAQ:INO), Moderna (NASDAQ:MRNA), Novavax (NASDAQ:NVAX), and Pfizer (NYSE:PFE). Their share prices have rallied every time there has been a headline suggesting a potential vaccine or drug might be around the corner.

Now, market participants are wondering if they are a little late to the party, or if these stocks could indeed go up any further. Seasoned investors realize that significant sums can be made, or lost, by betting on a potential cure. Therefore, many biopharma stocks are typically regarded as aggressive growth investments. 

Investors who do not want to concentrate on a specific company alone may instead invest in an exchange-traded fund. An ETF typically tracks an index. As one cannot directly invest in an index, an exchange-traded fund enables market participants to gain exposure to companies in that index. 

iShares Nasdaq Biotechnology ETF 

iShares NASDAQ Biotechnology ETF
iShares NASDAQ Biotechnology ETF

  • Current Price: $141.45

  • 52-week range: $92.15-$143.13

  • Dividend Yield: 0.27%

  • Expense Ratio: 0.47% per year, or $47 on a $10,000 investment.

Launched in 2001, the iShares Nasdaq Biotechnology ETF (NASDAQ:IBB) is the oldest and largest ETF. It is run by BlackRock (NYSE:BLK), the world's largest asset manager.

The fund tracks the NASDAQ Biotechnology Index, which contains securities of NASDAQ-listed companies classified as either biotechnology or pharmaceuticals that also meet other eligibility criteria.

IBB's five largest holdings are Amgen (NASDAQ:AMGN) Vertex Pharmaceuticals (NASDAQ:VRTX), Gilead Sciences (NASDAQ:GILD), Regeneron Pharmaceuticals (NASDAQ:REGN), and Illumina (NASDAQ:ILMN). They make up around 35% of the fund, which overall invests in 212 companies.

Year-to-date, IBB is up over 15%. In fact, on July 15, it hit an all-time high. Over the coming days, many biopharma companies will be reporting quarterly earnings. Given the recent increases in prices of individual shares, there may be some short-term profit-taking around the corner. A decline toward the $125 level is likely. This could provide potential IBB investors with a better entry point.

Its beta of 1.18 means IBB is more volatile than the broader market. This high beta is partly a reflection of the fact that biotech ETFs and biopharma stocks may have higher risk-return profiles than broader markets. Therefore, short-term traders may want to exercise caution as prices tend to be choppy. 

Bottom Line

ETFs are one of the fastest-growing investment vehicles in the US, as well as several other countries. Within the biopharma industry, many funds could be appropriate for a wide range of long-term buy-and-hold investors with a high tolerance for short-term market fluctuations.

Other ETFs that you may want to research could include:

ARK Genomic Revolution ETF (NYSE:ARKG), Invesco Dynamic Biotechnology & Genome ETF (NYSE:PBE), KraneShares MSCI All China Health Care ETF (NYSE:KURE), SPDR® S&P Biotech ETF (NYSE:XBI), SPDR® S&P Pharmaceuticals ETF (NYSE:XPH), or VanEck Vectors Pharmaceutical ETF (NASDAQ:PPH). We plan to cover them in the coming months. 

In The Search For A COVID Cure, Biopharma ETFs May Keep Your Portfolio Healthy
 

Related Articles

BlackBull Markets
Yellow Card For Sports ETF By BlackBull Markets - Sep 01, 2021

Cristiano Ronaldo announced that he would be leaving Juventus Football Club (MI:JUVE) and returning to play for the club where he started his professional career, Manchester United...

Damian Rodgers
A Gold ETF That Pays You Monthly By Damian Rodgers - Jul 29, 2021

There is a problem with gold ETFs like GLD (NYSE:GLD), iShares Gold Trust (NYSE:IAU), and GraniteShares Gold Trust (NYSE:BAR). They don’t pay any yield at all to investors. Gold...

In The Search For A COVID Cure, Biopharma ETFs May Keep Your Portfolio Healthy

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (6)
Jeff Page
Jeff Page May 07, 2021 7:02AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Agree, just a word of warning to investors: 1) have a buy strategy; are you going in at $ X or buying smaller amounts on pull backs until you have a predetermined dollar amount in? 2) What's your sell strategy? Start selling in small amounts after 15% gains, 20% gains? Are you setting a sell stop?Stick with your strategy.
m mori
m mori Sep 29, 2020 3:03PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
what are your thoughts on GNBT using peptides for COV 19 vaccine and Full FDA approval and sales to All the VET'S ADMINISTRATION FACILITIES? + recent passed phase ll breast cancer passage which pretty much put em in financial limbo?
Mohammad Bhuiya
Mohammad Bhuiya Jul 18, 2020 12:10PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
wonderful
Mostafa Amin
Mostafa Amin Jul 18, 2020 10:54AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thanks
Md. Musfiqur Rahman
Md. Musfiqur Rahman Jul 17, 2020 7:44AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
thanks sweet madam
Mehmet Aksarayli
Mehmet Aksarayli Jul 17, 2020 5:16AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thanks for valuable info
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email