3 Stocks Driving Biotech ETF SBIO’s Appeal

In the shifting landscape of ETFs, many funds claim to offer exposure to innovation. Technology plays a key role as a growth industry and a driver for performance across the economy overall, as well. With potentially multiple rate cuts on the horizon, then, identifying the right tech exposure could prove a decisive decision for the latter half of this year. The ALPS Medical Breakthroughs ETF (SBIO), for example, could represent a strong option as understood in three example stocks.

See more: This Underrated Tech ETF Is Spiking Amid Rate Cut Hype

The biotech ETF charges a 50 basis point fee for its services. The strategy tracks a market cap-weighted index that includes biotech firms with drugs in either Phase II or Phase III clinical trials with the FDA. The biotech ETF looks to firms with at least $200 million in AUM and up to $5 billion. 

Its hyper focus on a smaller subset of biotech firms has helped it perform well this year. SBIO has returned 16% over the last three months according to ETF Database data. That has outperformed both its ETF Database Category and FactSet Segment averages, with those numbers at 6.4% and 7.4%, respectively for that time frame.

Not only has the fund performed well, but it has also seen some exciting data, according to YCharts. The fund’s price has risen above both its 50 and 200-day simple moving averages (SMAs), historically an indicator of healthy momentum and a buy signal.

Which names, then, have stood out in SBIO’s portfolio and embody its strategy? Merus (MRUS) has massively outperformed the S&P 500 Total Return index, per YCharts. MRUS has returned 59.6% YTD as of September 11. The company works in clinical stage immuno-ology. Specifically, it engages in the discovery and development of various antibody therapeutics.

Akero Therapeutics (AKRO) focuses on serious metabolic diseases. AKRO, founded in 2017, is developing a treatment that protects against cellular stress and regulates lipids, carbohydrates, and proteins in the body. AKRO has returned 55.4% YTD in doing so.

Finally, Acadia Pharmaceuticals, Inc. (ACAD) has returned 29.7% in the same time frame. It too has beaten the main market indexes. ACAD focuses on developing drugs for central nervous system disorders. It has provided a 32.5% return on equity.

Those firms can provide multiple avenues for performance for investors. Rate cuts could help those firms borrow more while waiting on revenues from those drugs once approved. At the same time, rate cuts could also make M&A activity targeting those firms easier. Together, the biotech ETF could make for one to watch in a lowering rate environment.

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