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Direxion Leveraged Healthcare ETF Ready To Make House Calls In 2021

January 6, 2021 10:54 am
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Direxion Leveraged Healthcare ETF Ready To Make House Calls In 2021

Coronavirus vaccines are being distributed, but case counts continue rising, a pair of scenarios ensuring the healthcare center will again be an epicenter of activity in 2021.

What Happened

Healthcare is a sector with both defensive and growth traits, but many traditional benchmarks often lack exposure to the sector's more exciting avenues. Active traders can add some excitement to the healthcare mix with the Direxion Daily Healthcare Bull 3X Shares (NYSE:CURE).

CURE, which is one of the oldest and largest leveraged healthcare exchange traded funds, looks to deliver triple the daily performance of the Health Care Select Sector Index.

Why It's Important

CURE, which is docile relative to some other geared ETFs, enters 2021 on a strong note, having jumped 7.40% over the past month. Additionally, there are ebbing though not dead political headwinds for CURE to contend with this year, but with electoral politics mostly in the rear view mirror for the rest of 2021, the healthcare sector could be a winner.

“While the largely solid underlying fundamentals of the healthcare sector are likely helping to support the returns, we believe some concerns remain around changes to U.S. healthcare policy, albeit at a lower level than before the November elections,” writes Morningstar analyst Damien Conover. “Overall, we don’t expect any major changes regarding healthcare reform, but rather more moderate changes that target insuring more people and easing some of the patient costs around specialty drugs.”

CURE's underlying index allocates over 42% of its weight to pharmaceuticals and biotechnology stocks, meaning there is some political risk in the form of the drug price debate, but that vulnerability is augmented by significant exposure to medical device makers – a healthcare growth area – and managed care providers, which should benefit now that the Medicare For All debate is likely dead, albeit temporarily.

What's Next

While CURE isn't designed to be a long-term investment and it should not be treated as such, over the course of 2021, there could be times when the geared ETF benefits from healthcare status as only slightly overvalued and home to legitimate value opportunities.

“Within the sector, we continue to see the most undervalued firms in the drug manufacturer and managed-care industries,” adds Conover. “The valuations of these industries seem to imply significant expected changes in U.S. healthcare policies, potentially driven by newly elected politicians. However, we expect only incremental changes to existing laws that shouldn’t have a major impact on the drug or insurance industries.”


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