When it comes to health care exchange-traded funds in 2020, it's a case of haves and have nots.
What To Know: The health care ETF “haves” are those with robust exposure to Moderna MRNA, or at the very least, hefty allocations to some of the other companies pacing the coronavirus vaccine competition.
In theory, the ARK Genomic Revolution ETF AKRG is a health care ETF “have not.” As in the fund has no exposure to Moderna, but that's not preventing the actively managed ARKG from delivering a year-to-date gain of 66.41%.
Why It's Important: Outperformance is old hat for AKRG. Over the past three years, the ETF is up 164.7%. Looked at differently, the returns of the S&P 500 Health Care Index and the Nasdaq Biotechnology Index over that same period could be combined and then doubled and the result would be a percentage that still lags ARKG.
Of course, all of that is in the past, but the long-term outlook for genomics investing is bright.
“Over the last five years, we have passed key inflection points in the ability to access, manipulate, and understand the molecular building blocks of the human body,” writes ARK Director of Research Brett Winton in a recent paper. “The ‘genomic age’ of medicine promises profound ramifications for human health and for the companies involved, among them: (i) tool providers that enable basic research, sharpen the precision of diagnostics, and guide personalized medicine; (ii) diagnostic platforms deploying data that informs the treatment of disease; (iii) and other companies deploying technology and data to create next-generation treatments and cures, increasing returns on therapeutic research and development for the first time in 20 years.
As noted above, in 2020, it's easy for investors to be seduced by health care ETFs highly levered to COVID-19 vaccines, but there's more to the ARKG story and that story extends beyond the time when the virus is a thing of the past.
“ARK Invest estimates that by 2024 therapeutic pipelines and tool providers should generate hundreds of billions of dollars in the new revenue and trillions in new market capitalizations as they transition to the genomic age,” notes Winton.
What's Next? There are several genomics sub-segments represented in ARKG, but one of the more compelling is Clustered Regularly Interspaced Short Palindromic Repeats (CRISPR). CRISPR is a cornerstone of the livable drugs market.
“The addressable market for living drugs in oncology could exceed $200 billion annually as they impact more types of cancer at earlier stages than historically has been the case. Enabled by gene-editing, the applications could extend well beyond oncology, impacting the longevity of human life materially,” according to ARK.
Good news: CRISPR Therapeutics CRSP is ARKG's second-largest holding at a weight of 11.28%. That stock is up almost 88% over the past 90 days.
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