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As COVID Cases Surge, so Does Investor Interest in Biotechnology

While local administrations return to the drawing board to reform their timelines, financial professionals stay the course in eyeing biotechnology as the emblematic ‘hand’ that will control the speed in which the valve is opened or closed. In this TrackStar Insights edition of Advisors in Focus, we’ll reveal what fund sectors and stocks are being researched in concert with the rapid directional changes in state governance.

Below are the five most-researched ETF categories by financial advisors this week (source: TrackStarIQ):

  • Materials
  • Technology
  • Health & Biotech
  • Oil & Gas
  • Financials

The Health and Biotech sector saw a 22.5% lift in advisor engagement from the previous week, as vaccine and drug trial news continues to move markets.

Investors persist in trying to size up the future biotech winners and losers in today’s ever-changing landscape. Taking a deeper dive, the ten stocks that led advisor interest this week within the sector are:

  • Inovio Pharmaceuticals (INO)
  • Kitov Pharma (KTOV)
  • Sorrento Therapeutics (SRNE)
  • Vaxart (VXRT)
  • Novavax (NVAX)
  • Moderna (MRNA)
  • VBI Vaccines (VBIV)
  • iBio (IBIO)
  • Novan (NOVN)
  • Trevena (TRVN)

Individual biotech stocks are known for their volatile nature because share prices rise or fall in reaction to the latest headlines about drug trials or FDA approvals. History has shown that biotech ETFs are also capable of substantial percentage moves in short time frames as well.

Let’s consider two with stellar three-month rallies: one passively managed, and the other actively managed.

SPDR S&P 500 Biotech Fund (XBI)

SPDR S&P 500 Biotech Fund (XBI) is a passive biotech ETF that tracks the S&P Biotechnology Select Industry Index, which consists of 136 stocks currently within the biotechnology segment of the S&P U.S. total market composite index. This ETF was the most researched biotech fund this month based on TrackStarIQ data.

The ETF has $5.2 billion in assets, and shareholders are likely satisfied with recent performance: XBI is up 17.7% YTD and 44.5% in the past three months.

Fast Facts:

Fund assets: $5.2 billion
Number of holdings: 136
YTD Return: 17.7%
Three-month: 44.5%
Top five holdings and portfolio weighting:

  • NVAX – 2.2%
  • NVTA – 2%
  • INO – 1.95%
  • OPK – 1.5%
  • ARWR – 1.4%

Novavax accounts for the largest percentage within the SPDR S&P Biotech Fund and the ticker also ranks in the TrackStarIQ sector’s top ten stocks researched by advisors, along with Inovio.

ARK Genomic Revolution ETF (ARKG)

ARK Genomic Revolution Fund (ARKG) is an actively managed ETF that invests in healthcare, technology, basic materials, or any company that falls within the fund’s investment theme of genomics innovation. While not as well known as XBI, TrackStarIQ rankings suggest that the fund is seeing increased interest by the financial advisor community lately.

In addition, ARKG shares have substantially outperformed passively managed biotech ETFs: surging 55.6% year-to-date and 67% over the past three months.

Fast Facts:

Fund Assets: $1.3 billion
No. of holdings: 38
YTD Return: 55.6%
Three-month: 66.7%
Top five holdings and portfolio weighting:

  • CRSP – 9.4%
  • ILMN – 8.6%
  • NVTA – 8%
  • ARCT – 7%
  • NTLA – 4.2%

The fourth-largest holding in the ARK Genomic Revolution Fund—Arcturus Therapeutics (ARCT)—has rallied 360% in 2020, and the substantial gains in that stock help to explain why the actively managed ETF has easily outperformed passively managed biotech ETFs.

We will continue to monitor activity in this sector as more COVID impact unfolds.