An ETF with the Best-of-Breed COVID-19 Vaccine Stock

08/26/2020 5:00 am EST

Focus: HEALTHCARE

Jim Woods

Editor, Successful Investing, Intelligence Report

Right now, the markets are optimistic about science discovering a vaccine, and that’s for good reason, asserts Jim Woods, growth and income expert and editor of Successful Investing.

You see, when COVID-19 first vaulted into pandemic status, experts were forecasting between 12 and 18 months before a vaccine could be developed.

So, experts in the field, along with the federal powers that be, stepped up to move the process along at “Warp Speed,” the moniker for the Trump administration’s public and private program to fast-track a COVID-19 therapeutic.

The result of this effort is that we now have multiple companies in each of the various phases of clinical trials (Phase 1, II and III).

Large health care and medical products makers such as Johnson & Johnson (JNJ), a long-time staple in our "Income Multipliers" portfolio, and Pfizer (PFE) are two of the biggest players here, but the real excitement is with companies such as Moderna (MRNA), AstraZeneca PLC (AZN), GlaxoSmithKline PLC (GSK), Novavax (NVAX) and Inovio Pharmaceuticals (INO).

ETF

Each of these companies has a vaccine/treatment in one or more clinical trial phases. And while no treatment is ready to be deployed just yet, the eager anticipation of a product coming to market is a trend I think we can benefit from in our Tactical Trends Portfolio (TTP).

Call it a vaccine trade, or a COVID-19 trade, or just smart ownership of a basket of pharmaceutical stocks likely to surge on any positive vaccine news.

Whatever you call it, the time has come to gain exposure to this game-changing segment of the market; we recommended that you buy the VanEck Pharmaceutical ETF (PPH).

This index fund seeks to own the 25 largest U.S.-listed pharmaceutical stocks and has been in existence since 2011. What sets PPH apart from its peer group is that it includes both U.S.-domiciled companies and foreign stocks trading as American Depository Receipts on U.S. exchanges.

Most funds just target U.S. stocks and thus will overlook foreign developed companies. The result is that we get a globally diversified basket of the best-of-breed COVID-19 vaccine stocks, including significant allocations to AZN, JNJ, PFE, GSK and many more.

Each of these stocks represents roughly 5% of the total PPH basket and the weighted average market capitalization of the underlying holdings is $102 billion.

The top country dispersion in this fund includes a 63% allocation to the United States, followed by the United Kingdom (11.6%), Switzerland (5%), France (5%) and Israel (4.7%).

It should come as no surprise that the recent strength of some of these larger COVID-19 vaccine plays has pushed PPH back very close to new 52-week highs.

And while PPH has seen a big run higher since the March lows (what hasn’t?), it is by no means way too overextended the way so many sectors have become in recent months.

Still, continued positive sentiment surrounding the development and deployment of a COVID-19 vaccine will almost certainly continue to deliver buyers into PPH, and that will mean much more upside ahead for the stocks in this fund — and more upside for our Tactical Trends Portfolio.

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