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COVID-19 Vaccine Progress Brings 2 ETFs Back Into Focus

By (Tezcan Gecgil/ )ETFsNov 16, 2020 03:11AM ET
COVID-19 Vaccine Progress Brings 2 ETFs Back Into Focus
By (Tezcan Gecgil/ )   |  Nov 16, 2020 03:11AM ET
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Developments on the COVID-19 vaccine last week helped buoy a variety of stocks. On Friday, the S&P 500 and Russell 2000 reached new all-time highs, while the NASDAQ closed lower for the week, indicating that investors are no longer putting all their eggs into the stay-at-home basket of technology stocks.

Both Dr. Albert Bourla, CEO of Pfizer (NYSE:PFE), as well as Prof. Ugur Sahin, M.D. and Dr. Özlem Türeci, the 'dream-team' behind Pfizer's German vaccine partner BioNTech (NASDAQ:BNTX) made announcements regarding the progress of the immunization, boosting confidence that there could be an antidote in sight to both the devastating health and economic effects of the pandemic.

In the coming days, there could potentially be additional encouraging news from Moderna (NASDAQ:MRNA) as well.

We previously covered several relevant exchange-traded funds (ETFs)—one for investing in these biopharma companies and two for a post-COVID world. Below, we continue that discussion with two more ETFs appropriate for those optimistic about a vaccine:

1. ETFMG Travel Tech ETF

  • Current price: $22.46
  • 52-week range: $11.24 - $26.69
  • Expense ratio: 0.75%

Following the vaccine news last week, shares of companies in the energy, airline and travel sectors benefited from relief rallies. Our first fund, the ETFMG Travel Tech ETF (NYSE:AWAY), offers exposure to travel and tourism businesses relying heavily on technology.

AWAY Weekly Chart
AWAY Weekly Chart

AWAY, which has 28 holdings, tracks the Prime Travel Technology Index. The top ten holdings make up close to half its almost $30 million net assets.

Mobility platform Uber Technologies (NYSE:UBER), best known for its ride-hailing taxi app, online travel group Expedia (NASDAQ:EXPE) and travel software provider Sabre (NASDAQ:SABR) lead the names in the fund.

According to metrics from the London-headquartered non-profit organization World Travel & Tourism Council, over the past decade, the global travel and tourism industry has been one of the largest economic sectors. In 2019, it contributed US$8.9 trillion to the world's GDP or around 10.3%.

Needless to say, the final numbers for 2020 will be markedly less. The U.S. Department of Homeland Security Transportation Security Administration (TSA) shows that the number of passengers screened at TSA checkpoints on Nov. 13, 2020 stood at 881,579, a 63% drop from the same weekday a year prior when 2,437,211 travelers were screened at TSA checkpoints.

In April the difference was even more dramatic. On Apr. 14, 2020, there were 87,534 traveler screens by TSA, while the same day in 2019, there were 2,208,688 such travellers—a 96% drop.

The ETFMG Travel Tech ETF started trading in February 2020, the pandemic's early days; shares were shy of $25. Despite a remarkable comeback since the lows seen in March, it is still down around 10%.

The road to recovery remains unclear, but a recent industry report by McKinsey & Company said:

"An optimistic recovery scenario, combining rapid virus containment and rebounding economies, will see recovery to 85 percent of 2019 volumes in by 2021 and a full recovery by 2023... Under a pessimistic recovery scenario, 2021 levels can be as low as 60 percent of 2019, further postponing the recovery."

We know for sure that positive developments on the vaccine front will support economic recovery, global travel and tourism businesses included in AWAY. Potential long-term investors may find better value around $20, or below.

2. Invesco S&P 500 Equal Weight Health Care ETF

  • Current price: $255.91
  • 52-week range: $157.99 - $259.98
  • Yield: 0.52%
  • Expense ratio: 0.40%

Invesco S&P 500® Equal Weight Health Care ETF (NYSE:RYH), provides exposure to a range of US health care stocks. The fund started trading in 2006.

RHY Weekly Chart
RHY Weekly Chart

RYH, which has 63 holdings, tracks the S&P 500® Equal Weight Health Care Index. The top ten firms make up less than 20% of net assets, so no single stock's weighting is large enough to affect the fund by itself.

Medical device company Align (NASDAQ:ALGN), health services organization Cigna (NYSE:CI), health insurance company Anthem (NYSE:ANTM), pharma solutions provider Catalent (NYSE:CTLT), and dialysis care leader DaVita (NYSE:DVA) are several of the leading names.

As far as sectors are concerned, Health Care Equipment & Supplies (34.73%) and Health Care Providers & Services (25.60%) have the top spots, followed by Pharmaceuticals, Life Sciences Tools & Services, Biotechnology and Health Care Technology.

Since the start of the year, the fund is up over 15% and hit an all-time high on Nov. 9. Those investors looking for diversified exposure to US-based health care companies may consider buying the dips.

COVID-19 Vaccine Progress Brings 2 ETFs Back Into Focus

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COVID-19 Vaccine Progress Brings 2 ETFs Back Into Focus

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