There's A Really Good Chance You Missed One Of The Year's Best ETFs

Investors have been piling into exchange traded funds again this year, mostly pure beta, core equity and fixed income funds. The list of the top asset-gathering ETFs reads like rundown of the usual suspects.

There's nothing wrong with that, but as investors flock to broad market equity and aggregate bond funds to keep up with the Joneses, they miss out on tactical opportunities like the Virtus LifeSci Biotech Clinical Trials ETF BBC.

BBC, which turns five years old this week, is up 41.14% year to date, thanks in large part to a fourth-quarter gain of 25.7%.

Why It's Important

BBC tracks the LifeSci Biotechnology Clinical Trials Index, a basket of early-stage biotechnology companies. Said another way, BBC is chock full of biotech companies that may or may not bring a drug to market and may or may not become the apple of an acquirer's eye.

History shows Food and Drug Administration approvals and takeovers can mint fortunes overnight for investors in smaller biotech companies. As for BBC's anonymity, that's another matter, but there's some evidence that may change thanks to a recent Bloomberg article.

“The fund benefited from a busy month for biotech companies,” reports Bloomberg. “While Novartis’s $9.7 billion takeover of Medicines Co. boosted overall sentiment, stakes in ChemoCentryx Inc. and Karyopharm Therapeutics Inc. helped BBC outperform. ChemoCentry’s shares soared on positive data regarding a drug to treat an inflammation disease, while Karyopharm reported better-than-expected sales.”

BBC is an equal-weight ETF so ChemoCentryx CCXI and Karyopharm KPTI combine for just under 6% of the fund's weight. Still, recent bullishness in those names has been enough to propel BBC higher by more than 22% this month.

What's Next

BBC isn't alone in being overlooked. Its stablemate, the Virtus LifeSci Biotech Products ETF BBP has about $28 million in assets meaning plenty of investors have missed out on that fund's 14.40% December gain.

BBP is slightly less speculative than BBC as its member firms are companies with at least drug that has been approved by the FDA.

What's interesting is that the FDA has been approving new drugs and therapies at a pace in 2019 that's above historical norms, even sparking concern among some in the clinical community. If that approval rate remains high or increases next year, BBC and BBP may finally get their days in the sun.

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