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Tap the Red Hot Biotech Sector With These 2 Leveraged ETFs
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The biotech sector has turned hot lately especially after the first full U.S. approval of a COVID-19 vaccine made by Pfizer (PFE - Free Report) and BioNTech. This is because the move is likely to spur a new wave of vaccine mandates, thereby resulting in more upside in the sector. Notably, Pfizer’s shot is the first COVID-19 vaccine to receive full regulatory approval in the United States.
The full approval of the vaccine, which had been under an emergency use authorization since December, will help quash the ongoing surge in the COVID-19 Delta variant and push up the vaccination rates. Additionally, the government plans to make COVID-19 vaccine booster shots widely available starting on Sep 20 for adults who completed their initial inoculation in two-dose vaccines made by Moderna Inc (MRNA - Free Report) and by Pfizer at least six months ago. The plan so far does not include the Johnson & Johnson's (JNJ - Free Report) vaccine, the rollout of which started several months later (read: Biotech ETFs to Benefit From Latest Booster Update).
A separate study from Johnson & Johnson showed that a booster dose of its one-shot coronavirus vaccine generated a big spike in antibodies. It found that a second dose of the JNJ vaccine delivered six months after the first shot resulted in a nine-fold increase in binding antibody levels over those seen 28 days after the first dose. The data comes from two Phase 2 trials conducted in the United States and Europe. Some of the 2,000 or so people in the studies got booster doses six months after their first doses of JNJ's Janssen vaccine.
Additionally, merger and acquisition activities are fueling strength in the sector. In the latest announcement, Pfizer agreed to buy the Canadian drug developer Trillium Therapeutics for a $2.26 billion, or $18.50 per share, in a cash deal to strengthen its arsenal of blood cancer therapies (read: Healthcare ETFs Surge on FDA Full-Vaccine Nod & Deal News).
Further, the uptrend in the sector is likely to continue given the impressive industry trends including new drug nods, an accelerated pace of innovation, promising drug launches, the growing importance of biosimilars, cost-cutting efforts, an aging population, expanding insurance coverage, the rising middleclass, insatiable demand for new drugs and ever-increasing spending on healthcare.
Given this, investors could easily tap the bullish trend by considering a near-term long on the biotech sector. Fortunately, with the advent of ETFs, this is quite easy as there are few options to accomplish this task. Below we highlight them and some of the key differences between each
Investors aiming to make big gains in a short span can bet on BIB. It provides twice the daily return of the Nasdaq Biotechnology Index and exchanges 71,000 shares in hand, on average. The fund has an AUM of $286.3 million and charges 95 bps in fees and expenses. It has surged 4.4% in a week.
This fund creates three times leveraged long position on the S&P Biotechnology Select Industry Index. It charges an annual fee of 0.95% and trades in a heavy average daily volume of about 2.8 million shares. The fund has AUM of $837.3 million (read: 5 Best Inverse/Leveraged ETF Areas of Last Week).
Bottom Line
While this strategy is highly beneficial for short-term traders, it could lead to huge losses compared to traditional funds in fluctuating or seesawing markets. Further, the funds’ performance could vary significantly from the actual performance of their underlying index over a longer period when compared to the shorter period (such as weeks or months) due to their compounding effect.
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Tap the Red Hot Biotech Sector With These 2 Leveraged ETFs
The biotech sector has turned hot lately especially after the first full U.S. approval of a COVID-19 vaccine made by Pfizer (PFE - Free Report) and BioNTech. This is because the move is likely to spur a new wave of vaccine mandates, thereby resulting in more upside in the sector. Notably, Pfizer’s shot is the first COVID-19 vaccine to receive full regulatory approval in the United States.
The full approval of the vaccine, which had been under an emergency use authorization since December, will help quash the ongoing surge in the COVID-19 Delta variant and push up the vaccination rates. Additionally, the government plans to make COVID-19 vaccine booster shots widely available starting on Sep 20 for adults who completed their initial inoculation in two-dose vaccines made by Moderna Inc (MRNA - Free Report) and by Pfizer at least six months ago. The plan so far does not include the Johnson & Johnson's (JNJ - Free Report) vaccine, the rollout of which started several months later (read: Biotech ETFs to Benefit From Latest Booster Update).
A separate study from Johnson & Johnson showed that a booster dose of its one-shot coronavirus vaccine generated a big spike in antibodies. It found that a second dose of the JNJ vaccine delivered six months after the first shot resulted in a nine-fold increase in binding antibody levels over those seen 28 days after the first dose. The data comes from two Phase 2 trials conducted in the United States and Europe. Some of the 2,000 or so people in the studies got booster doses six months after their first doses of JNJ's Janssen vaccine.
Additionally, merger and acquisition activities are fueling strength in the sector. In the latest announcement, Pfizer agreed to buy the Canadian drug developer Trillium Therapeutics for a $2.26 billion, or $18.50 per share, in a cash deal to strengthen its arsenal of blood cancer therapies (read: Healthcare ETFs Surge on FDA Full-Vaccine Nod & Deal News).
Further, the uptrend in the sector is likely to continue given the impressive industry trends including new drug nods, an accelerated pace of innovation, promising drug launches, the growing importance of biosimilars, cost-cutting efforts, an aging population, expanding insurance coverage, the rising middleclass, insatiable demand for new drugs and ever-increasing spending on healthcare.
Given this, investors could easily tap the bullish trend by considering a near-term long on the biotech sector. Fortunately, with the advent of ETFs, this is quite easy as there are few options to accomplish this task. Below we highlight them and some of the key differences between each
ProShares Ultra Nasdaq Biotechnology (BIB - Free Report)
Investors aiming to make big gains in a short span can bet on BIB. It provides twice the daily return of the Nasdaq Biotechnology Index and exchanges 71,000 shares in hand, on average. The fund has an AUM of $286.3 million and charges 95 bps in fees and expenses. It has surged 4.4% in a week.
Direxion Daily S&P Biotech Bull 3x Shares (LABU - Free Report)
This fund creates three times leveraged long position on the S&P Biotechnology Select Industry Index. It charges an annual fee of 0.95% and trades in a heavy average daily volume of about 2.8 million shares. The fund has AUM of $837.3 million (read: 5 Best Inverse/Leveraged ETF Areas of Last Week).
Bottom Line
While this strategy is highly beneficial for short-term traders, it could lead to huge losses compared to traditional funds in fluctuating or seesawing markets. Further, the funds’ performance could vary significantly from the actual performance of their underlying index over a longer period when compared to the shorter period (such as weeks or months) due to their compounding effect.