5 Small-cap Biotech ETFs to Watch
Thanks to exchange-traded funds (ETFs), investors don’t have to be tied to one specific stock. When it comes to biotech ETFs, they give sector participants exposure to many biotech companies via one vehicle.
ETFs are a popular choice as they allow investors to enter the market more safely compared to investing in standalone stocks. A key advantage is that even if one company in the ETF takes a hit, the impact will be less direct.
All other figures were also current as of that date. Read on to learn more about these investment vehicles.
1. ProShares Ultra NASDAQ Biotechnology ETF (NASDAQ:BIB)
AUM: US$89.54 million
The ProShares Ultra NASDAQ Biotechnology ETF, launched in April 2010, is leveraged to offer twice daily long exposure to the broad-based NASDAQ Biotechnology Index, making it an ideal choice “for investors with a bullish short-term outlook for biotechnology or pharmaceutical companies.” However, analysts also advise investors with a low risk tolerance or a buy-and-hold strategy against investing in this fund due to its unique nature.
Of the 263 holdings in this ETF, the top biotech stocks are Gilead Sciences (NASDAQ:GILD) at a 6.78 percent weight, Amgen (NASDAQ:AMGN) at 6.23 percent and Vertex Pharmaceuticals (NASDAQ:VRTX) at 6.17 percent.
2. Direxion Daily S&P Biotech Bear 3x Shares (ARCA:LABD)
AUM: US$68.18 million
The Direxion Daily S&P Biotech Bear 3X Shares is designed to provide three times the daily return of the inverse of the S&P Biotechnology Select Industry Index, meaning that the ETF rises in value when the index falls and falls in value when the index rises.
Leveraged inverse ETFs are designed for short-term trading and are not suitable for holding long-term. They also carry a high degree of risk as they can be significantly affected by market volatility.
Unlike the other ETFs on this list, LABD achieves its investment objective through holding financial contracts such as futures rather than holding individual stocks.
3. Tema Heart and Health ETF (NASDAQ:HRTS)
AUM: US$56.55 million
Launched in November 2023, the Tema Heart and Health ETF tracks biotech stocks with a focus on diabetes, obesity and cardiovascular diseases. The fund was renamed on March 25 from Tema Cardiovascular and Metabolic ETF, and again on June 27 from the GLP-1 Obesity and Cardiometabolic ETF.
There are 46 holdings in this biotechnology fund, with about 75 percent being large-cap stocks and 22 percent mid-cap. About three-quarters of its holdings are based in the US.
This Tema ETF’s top biotech holdings are Eli Lilly and Company (NYSE:LLY) at a 10.04 percent weight, Roche Holding (OTCQX:RHHBY,SWX:ROG) at a 5.42 percent weight and Johnson & Johnson (NYSE:JNJ) at a 4.8 percent weight.
4. Global X Genomics & Biotechnology ETF (NASDAQ:GNOM)
AUM: US$51.53 million
The Global X Genomics & Biotechnology ETF tracks the Solactive Genomics Index, focusing on companies involved in gene editing, genomic sequencing, genetic medicine, computational genomics and biotech.
The ETF holds 50 stocks, with about 90 percent in the pharmaceuticals, biotechnology and life sciences sector. Its top three holdings are Moderna (NASDAQ:MRNA) at 6.33 percent, Arrowhead Pharmaceuticals (NASDAQ:ARWR) at 6.14 percent and Praxis Precision Medicines (NASDAQ:PRAX) at 5.98 percent.
5. Virtus LifeSci Biotech Products ETF (ARCA:BBP)
AUM: US$44.8 million
The Virtus LifeSci Biotech Products ETF tracks the LifeSci Biotechnology Products Index, focusing on US-listed biotech companies with at least one FDA-approved drug therapy.
Launched in December 2014 by Virtus Investment Partners, it provides targeted exposure to firms in the product stage, from startups to large players, through passive, equal-weighted holdings rebalanced semi-annually.
Its top holdings include ImmunityBio (NASDAQ:IBRX) at a weight of 3.98 percent, Mirum Pharmaceuticals (NASDAQ:MIRM) at 2.4 percent and Moderna at 2.16 percent.
Securities Disclosure: I, Meagen Seatter, hold no direct investment interest in any company mentioned in this article.
