Market Overview

The Doctor Is In With This New Telemedicine ETF

The Doctor Is In With This New Telemedicine ETF

Telemedicine was in the early innings of a boom prior to the coronavirus pandemic, but the pandemic hastened the industry's ascent, as it has with several other market segments.

What Happened: Where's a hot theme, an exchange-traded fund usually isn't far behind. Thanks to the Global X Telemedicine & Digital Health ETF (NASDAQ: EDOC), which debuted Thursday, telemedicine now has its own ETF.

EDOC, which tracks the Solactive Telemedicine & Digital Health Index, extends a run of nifty health care ETF ideas coming to market during the pandemic, looking to tap into investors' appetite for healthcare plays that are more relevant in the current environment.

EDOC's 40 member firms include “companies involved in Telemedicine, Health Care Analytics, Connected Health Care Devices, and Administrative Digitization,” according to Global X.

Why It's Important: Health care, like investing, is rooted in data and the data are compelling for EDOC.

“Some U.S. health care providers report that telehealth visits, defined as consultations in which a patient connects with a doctor via voice or video chat, increased by as much as 175x since the pandemic began,” according to Global X research.

None of EDOC's holdings exceed weights of 4% and while it's a telemedicine ETF, the rookie fund doesn't feature an excessive weighting to Teladoc Health (NYSE: TDOC). In fact, that stock isn't found among EDOC's top 10 holdings. Health care technology, services and equipment names combine for almost three-quarters of EDOC's weight.

What's Next: With an ETF like EDOC, investors are likely to encounter names with some frothy multiples as highlighted by the fund's price-to-earnings ratio of 79.71 times. However, there's growth to support those valuations.

“In our view, these trends are driving significant opportunity in telemedicine and digital health – the market for these technologies reached an estimated $175 billion in 2019 and is expected to grow to over $657 billion by 2026,” according to Global X.

Another point in favor of telemedicine is the industry's potential capabilities in reducing health care waste and needless costs.

“In the US, approximately 30% of health care spending could be considered wasteful, annually amounting to between $760 billion to $930 billion. With aging populations increasing demand for health services and costs rising faster than inflation, technology-driven health solutions may present the best remedy to these shortcomings,” according to Global X.

EDOC charges 0.68% per year, or $68 on a $10,000 investment.


Related Articles (TDOC + EDOC)

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