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Health Care and Technology: A Perfect Combo for Stock Investors Now ?

Eric Dutram • Apr 13, 2017
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When you try to talk to investors about the health care sector these days, the discussion inevitably leads to the ongoing battle over Obamacare and the AHCA. The future is very uncertain for this sector, and investors have seen some volatile trading for ETFs tracking the broad market, such as XLV, or worries over pricing issues for funds in the biotech sector, like IBB.


And given the ongoing discussion for this sector, it is hard to say what the final outcome will be for Americans, or the stocks tracking this key market either.

How to Play This Situation


One thing that isn’t going to change about the health care industry going forward, however, is its continued adoption of technology. The health care world has been a bit slow to adopt new technological practices, but the area is finally coming on strong as of late.


Honestly, it is about time, as the area is definitely long overdue for a technological shakeup. Still, it can be hard to separate the areas of this market with high potential, and those that are just a passing fad. After all, there are plenty of buzzwords when it comes to the intersection of technology and health care, and like many things in health care, the jargon can be confusing.


Some of the latest buzzwords that investors have been talking about in this market include informatics, telemedicine, and even ‘cyborgization’, though some of these areas are definitely hitting the mainstream lately. But to get to the bottom of this story and to understand what is really going on with the adoption of technology in the health care world, I spoke with Andrew Chanin, the CEO of PureFunds. His company is probably best-known for its cybersecurity ETF (HACK), but they also have a suite of other sector-focused funds, including the PureFunds ETFx HealthTech ETF (IMED).


As such, he was able to shed some light on this interesting topic for the latest edition of the Dutram Report, and clue us in on why this market might be worth focusing in on now.

My Chat with Andrew


In the interview, Andrew and I discuss why it has taken so long for health care companies to adopt technology, and what they are doing about this lack of investment these days. Andrew and I also converse about the prospects of this corner of the market in today’s market environment, and if an Obamacare replacement will be a concern for investors in this area.


We also talk about IMED in a bit greater detail, and we dive into some of the fund holdings, such as Teladoc (TDOC). Additionally, we take a long at the large cap vs. small cap breakdown, noting how this fund might differ from some out there that are just focused on medical devices and companies like MDT, and how PureFunds’ IMED—which includes both device stocks like ISRG but also more software-oriented plays such as MDRX—could be a bit different for investors.


Lastly, we discuss how this might be an area for investors to focus on for growth, and what some of those buzzwords I mentioned earlier mean for investors right now. In particular, this idea of cyborgization could have transformative effects for many people out there, but that is really only the tip of the iceberg in this quickly-growing, but little-discussed health tech market.

Bottom Line


Andrew and I also talk about why numerous companies are focusing in on this corner of the health care market now, and what investors need to know about how this sort of strategy might fit into a portfolio too. So, if you have been unsure of what to do with your health care investments in light of the legislative uncertainty, this podcast is definitely a must-listen.


But do you think health tech is the next hot area for investors in this sector? Listen to this edition of the Dutram Report and be the judge yourself. And make sure to write us in at podcast @ zacks.com or find me on twitter @EricDutram to let me know what you think of this interview, and health care investing as well.


But for more news and discussion regarding the world of ETFs, make sure to be on the lookout for the next edition of the Dutram Report, and check out the many other great Zacks podcasts as well !

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During the past year, the ETFx HealthTech™ Total Return Index (NYSE: HTXRI) generated a one-year total return of -1.25% in 2018. For comparison the MSCI ACWI Health Care Index (“MIWD0HC00PUS”) generated a 2.22% return for 2018, while the Thomson Reuters Global Healthcare Total Return Index (“TRXFLDGLTUHLC”) generated a return of 1.28%. In the US, in 2018 there were 36 ETFs tracking the healthcare sector and as a group their return average was -4.31% for the year. Over the past three years, HTXRI generated an annualized total return of 13.36%, comparing favorably to MIWD0HC00PUS which generated an annualized return of 4.95% during the same period, while the TRXFLDGLTUHLC generated an annualized return of 9.93%. Over the past ten years, HTXRI generated an annualized total return of 19.62%, comparing favorably to MIWD0HC00PUS which generated an annualized return of 12.46% during the same period, while the TRXFLDGLTUHLC generated an annualized return of 13.12%. As of Friday, January 25th HTXRI is up +11.3% year-to-date. The ETFx HealthTech™ Index is a modified equal weighted index comprised of companies whose businesses stand to benefit substantially from the burgeoning global demand for advanced technologies in medicine and healthcare. The index is rebalanced each March, June, September and December. The American Stock Exchange announced on December 20th, 2005 that it had begun publishing the Palomar Healthcare Technology Index an index comprised of publicly traded companies engaged in Healthcare Informatics, Medical Instruments and Medical Appliances. Since summer of 2015, the index has been rebranded as the ETFx HealthTech™ Index. Initially the index was developed to capture, in a unified manner, the investment potential associated with the substantial impact of technology on the allocation, delivery and management of healthcare services and products through companies engaged in Healthcare Informatics, Medical Instruments and Medical Appliances. ETFx Investment Partners has been an early evangelist about the long-term trend of the convergence of these technologies and the substantial benefits this convergence creates. The ETFx HealthTech™ index is calculated by Refinitiv and disseminated by the New York Stock Exchange. It uses a modified equal weighting calculation methodology and a multi-factor approach for constituent selection. Recently, FSITC “Global AI Precision Medicine Fund”, offered by First Securities Investment Trust Co. Ltd. since May 2018, selected ETFx HealthTech™ as its benchmark. The Fund invests a wide range of companies whose principal activities stem from Genomics, Bioinformatics, Artificial Intelligence, IOT to facilitate healthcare industry with accurate and fast medical behavior, to health management, disease prevention, disease diagnosis, disease treatment, or after-illness care. ETFx Investment Partners is an independent stock index developer providing thematic exposure and which specialize in themes rooted in the confluence of long-term forces interlinking population, water, energy and food. For more information, please reach out to Elias Azrak at info@ETFxIP.com.
By Jim Woods 26 Nov, 2018
The PureFunds ETFx HealthTech ETF (Nasdaq: IMED) stands at an interesting crossroads between the field of medicine itself and the technology used to advance medical knowledge and treatment in new and exciting ways. This intersection between medicine and technology has been dubbed “HealthTech.” Medicine continuously is driven forward by the application of new technology and data solutions to devices and procedures. “HealthTech” has made things like 3D-printed prosthetics, robot-assisted surgery and telemedicine popular buzzwords in the medical field. One advantage that HealthTech has over other, more stagnant areas of the market and the medical field is its growth prospects. Obamacare initiatives and biotech, the drug manufacturing arm of the medical field, face an uncertain future under President Trump’s proposed policies, but there is always going to be demand for better and more advanced technology to keep the medical field on the cutting edge. According to Fortune, venture funding into HealthTech jumped 200% over five years (2010-2014) and the industry was valued at $72 trillion in 2015 in the United States alone. Despite this, HealthTech has been slow to get investor attention, probably because of the tendancy to invest in more traditional medical plays, such as biotech. PureFunds, the manager/sponsor of the popular cybersecurity ETF HACK, saw that there was no ETF assigned to the HealthTech arena and launched IMED just last year for that exact purpose. Created on August 31, 2016, IMED is tied to the ETFx HealthTech Index and tracks companies around the world that use technology to design and deliver health care solutions. The fund avoids pharmaceutical companies, which are currently on uncertain footing, and instead targets medical infomatics, instruments and devices. According to Andrew Chanin, CEO of PureFunds, IMED has less than 40% overlap with any other health care ETF currently available. The fund does not pay a dividend at present, has an expense ratio of 0.75% and only about $4.4 million in net assets, partly as a result of being less than a year old. In terms of performance, IMED has done well since its inception and is up close to 24% year to date. A company must have a market capitalization of at least $500 million to be included in the index, and it contained 22 foreign investments as of June 2016. IMED itself holds 48 positions currently and is approximately 75% in health care and 25% in technology. Its top five holdings are: Teladoc, Inc. (TDOC), 3.12%; Medidata Solutions, Inc. (MDSO), 3.00%; CompuGroup Medical SE, 2.78%; athenahealth, Inc. (ATHN), 2.77%; and Veeva Systems, Inc., Class A (VEEV), 2.67% In short, HealthTech has the potential to be long-term player in the medical and health care field. If the intersection between medicine and technology sounds like an interesting investment strategy, then the PureFunds ETFx HealthTech ETF (Nasdaq: IMED) could be a solid choice. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.
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