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5 ETFs Riding High on the Biotech Comeback

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Biotech, the downtrodden segment of the market, has made a solid comeback on bargain hunting. While most of the ETFs have rallied over the past month, Virtus LifeSci Biotech Clinical Trials ETF (BBC - Free Report) stole the show, climbing 18.4%. This was followed by Loncar Cancer Immunotherapy ETF (CNCR - Free Report) , SPDR S&P Biotech ETF (XBI - Free Report) , Virtus LifeSci Biotech Products ETF (BBP - Free Report) and ALPS Medical Breakthroughs ETF (SBIO - Free Report) rose more than 13% each.

A Nasdaq benchmark for biotechnology stocks has plunged almost a third from its all-time high last August as optimism over developments to curb the COVID-19 pandemic bolstered the industry and led to concerns over elevated valuations. Additionally, this high-growth biotech segment has borne the maximum brunt of the broader market sell-off, following the rising interest rate outlook (read: Best & Worst Performing ETFs of 1H22).

According to Michele Gesualdi, founder of London-based investment group Infinity Investment Partners, in the Financial Times, this is the worst correction in the biotech sector in his 22-year career. He said the sector is, on all metrics, “as cheap as it has ever been.”

Further, traders on forums such as Reddit's WallStreetBets acted to bid up shares of heavily-shorted stocks, triggering a phenomenon known as a "short squeeze", which pushes up the stock prices higher. Notably, short squeeze is a term used by market participants to refer to a phenomenon where short-sellers in a stock, who placed their bets on its fall, rush to hedge their positions or buy the stock in the event of an adverse price movement to cover their losses. This leads to a sharp rise in demand for the share and a huge rally in share prices.

Virtus LifeSci Biotech Clinical Trials ETF (BBC - Free Report)

Virtus LifeSci Biotech Clinical Trials ETF offers exposure to companies with promising drugs in clinical human trials that have not yet been approved by the FDA or gone into production. It follows the LifeSci Biotechnology Clinical Trials Index and holds 182 securities in its basket, with none accounting for more than 2% share.

Virtus LifeSci Biotech Clinical Trials ETF amassed $16.7 million in its asset base and charges 79 bps in fees per year from its investors. It carries a Zacks ETF Rank #3 (Hold) with a High-risk outlook (read: Did Safe Haven ETFs Protect Your Portfolio from Market Turmoil?).

Loncar Cancer Immunotherapy ETF (CNCR - Free Report)

Loncar Cancer Immunotherapy ETF offers exposure to a basket of companies that develop therapies to treat cancer by harnessing the body's own immune system. It holds 30 stocks in its basket, with each accounting for less than 4.2% of assets.

Loncar Cancer Immunotherapy ETF has AUM of $25.3 million and charges 79 bps in annual fees. The fund trades in an average daily volume of 7,000 shares and has a Zacks ETF Rank #3 with a High risk outlook.

SPDR S&P Biotech ETF (XBI - Free Report)

SPDR S&P Biotech ETF offers equal-weight exposure across 135 biotechnology stocks. It follows the S&P Biotechnology Select Industry Index, charging investors 35 bps in annual fees.

SPDR S&P Biotech ETF has AUM of $7.7 billion and trades in an average daily volume of 15 million shares. XBI has a Zacks ETF Rank #2 with a High risk outlook.

Virtus LifeSci Biotech Products ETF (BBP - Free Report)

Virtus LifeSci Biotech Products ETF follows the LifeSci Biotechnology Products Index, which measures the performance of biotechnology companies with at least one drug therapy approved by the FDA.

Holding 50 stocks, Virtus LifeSci Biotech Products ETF has accumulated AUM of $15.5 million and charges 79 bps in fees per year. BBP trades in volume of 1,000 shares a day on average and has a Zacks ETF Rank #3 with a High-risk outlook (read: Tap Q2 Earnings Growth With Sector ETFs).

ALPS Medical Breakthroughs ETF (SBIO - Free Report)

ALPS Medical Breakthroughs ETF provides exposure to companies with one or more drugs in phase II or phase III FDA clinical trials by tracking S-Network Medical Breakthroughs Index. It holds 131 securities in its basket.

ALPS Medical Breakthroughs ETF charges 50 bps in fees per year from its investors and trades in a moderate average daily volume of about 29,000 shares. It has AUM of $106.5 million in its asset base and carries a Zacks ETF Rank #3 with a High-risk outlook.