Stocks ticked lower to start the final trading day of the month. January has been a dismal month for stocks. The S&P 500 is edging correction territory with 7% loss this month. The Dow is off by 4.4%. Meanwhile, the Nasdaq is deep in correction territory, 15% below its record close, and headed for its worst month since October 2008.
“On the other side of this, the economy should continue to expand; earnings are pretty good. That’s enough to sustain markets, but I think they’re adjusting to the shift in monetary policy, fiscal policy, and earnings,” said Michael Arone, chief investment strategist at State Street Global Advisors.
Volatility could continue into February as the market digests supply chain snags, Fed policy changes, and rising rates, but we’ve found a ticker that has significant potential for success, regardless of what’s happening elsewhere.
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 for the overall market.
However, many investors who come to the biotech space to cash in on strong 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) but also $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 significant 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 critical in the biotech space, where specific companies are capable of turning in significant gains over short periods of time.
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), Alkermes (ALKS), Moderna (MRNA)
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