This article was originally published on ETFTrends.com.
Healthcare ETFs have been displaying positive momentum. Traders looking to bolster that healthcare momentum profile can consider leveraged ETFs, such as the Direxion Daily Pharmaceutical & Medical Bull 3X Shares (PILL) .
PILL seeks 300% of the daily performance of the Dynamic Pharmaceutical Intellidex Index, which consists of common shares of companies that are principally engaged in research, development, manufacture, sale or distribution of pharmaceuticals and drugs of all types.
There are other catalysts to consider, including that the U.S. economy is moving into the late-cycle phase, overall growth may slow and signs of an economic slowdown could pop up. Consequently, investors may also turn to defensive sectors that are less economically sensitive, such as health care. Additionally, healthcare derives a significant portion of its revenue on a domestic basis, meaning it is somewhat immune to the stronger dollar and trade war talk.
“Beyond the trend of positive earnings per share surprises from the likes of Pfizer, Eli Lilly and Regeneron Pharmaceuticals, there are a host of other factors that make big pharma the clear favorite going into Q2 earnings season. Not the least of which was the FDA’s recent approval of an experimental treatment for alzheimer’s disease from Biogen that boosted the company’s stock by nearly 20 percent in a matter of hours,†according to Direxion.
Prescription Power
PILL's underlying index allocates over 95% of its combined weight to pharmaceuticals and biotechnology stocks, levering the fund to an array of important fundamental factors.
Industry observers argue that medical technology companies can tap into increased healthcare spending among emerging economies while the U.S. market has matured and could experience slower growth. Looking ahead, in the years through 2024, spending growth is projected to average 5.8% and peak at 6.3% in 2020.
Bolstering biotechnology's prospects is a speedier approval process by the U.S. Food and Drug Administration. In 2012, the FDA was given the authority to designate certain drugs as a ‘breakthrough therapy,’ which then allowed that drug to move through the approval processes more quickly,†said Morningstar.
“What has truly enhanced the growth in biotech is the long sequence of M&A and IPO announcements that have taken place in the cash-flush industry. In late 2017 to early 2018, three acquisitions from Sanofi SA, Celgene Corporation and Gilead Sciences alone had the pharma giants moving $30 billion in capital. And Q1 2018 racked up about $47 billion in M&A. On top of that, here have already been 33 IPOs over the first seven months of the year alone,†adds Direxion.
For more market trends in pharma ETFs, click here.
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