EC Healthcare, Meet Momentum

A while back, we discovered that, in spite of the coronavirus-inspired panic, momentum stocks—well, certain momentum stocks, anyway—hadn’t lost their mojo. And, a little while after that, we noted the resilience of healthcare stocks during the recent sell-off.

Which brings us now to a confluence of momentum and healthcare: genomics. Companies such as Inovio Pharmaceuticals, Inc. (Nasdaq: INO), up 329% this year, and Twist Bioscience Corp. (Nasdaq: TWST), which has gained 97%, are engaged in clinical testing of a COVID-19 vaccine the development of synthetic DNA.

Now, THAT’s momentum.

Of course, not every genomics outfit has produced such stunning returns this year. Picking big winners out of a crowded biotech field isn’t easy, so many investors opt for the fund approach instead. More than a baker’s dozen exchange-traded funds could have provided exposure to Inovio and Twist this year.

The weightiest dollop is carried by the iShares Genomics Immunology and Healthcare ETF (NYSE Arca: IDNA), a young ETF that’s still flying under the radar of many advisors and investors. Launched last June, IDNA tracks a global index of 47 companies capitalizing on growth and innovation in genomics, immunology, and bioengineering. About a quarter of IDNA’s portfolio is given over to non-U.S. companies.

In a portfolio with a median commitment of 1.5%, Inovia takes up just 1.2% of IDNA’s market capitalization. Twist accounts for a shade under 0.7%. Still, IDNA is up 25% year to date.

IDNA may be difficult for some accounts to hold. First of all, it’s a small fund. The fund’s asset base barely clears $70 million and daily trading volume, averaging 80,000 shares over the past month, is still light. The real measure of the ETF’s liquidity is reflected in its bid/ask spreads, currently running a little wide at around 20 basis points. Spreads can widen during liquidity events, at the near quadrupling during the February-March sell-off attests.

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Disclosure: None.

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