ETF Ideas for Obama's Healthcare and Energy Policies

Each administration brings its own set of policies to the White House. Investing in ETFs may be a prudent way to experience a potential windfall from the country’s new direction without the high volatility inherent in individual stocks.

ETFs are a good way for investors to capitalize on policy initiatives of the Obama administration while reducing the day-to-day volatility compared to other investment options, such as stocks, remarks Daniel Harrison for IndexUniverse.

Health Care opportunities. Jim Oberweis, chief executive of Oberweis Asset Management, believes that “there is a possible positive [outcome] for pharmaceutical companies” since sales of prescription drugs will increase as health care coverage widens. Furthermore, Oberweis argues that health care providers may benefit from more patient visits and biotechs are in a more positive position than previously thought.

Broad-based and niche market ETFs that could benefit from the growth in the number of patients receiving coverage include:

• Health Care Select Sector SPDR (NYSEArca: XLV): up 14.3% year-to-date
• iShares Dow Jones U.S. Healthcare (NYSEArca: IYH): up 15.1% year-to-date
• iShares Dow Jones U.S. Medical Devices (NYSEArca: IHI): up 32.4% year-to-date; IHI is well-diversified, with 58% of assets under management in its top 10 holdings, and a maximum single-stock weighting of 10%. Companies included should benefit from the increase in the number of hospital patient visits.
• PowerShares Dynamic Pharmaceuticals (NYSEArca: PJP): up 10.3% year-to-date; PJP is a well-diversified ETF on large, mostly dividend-paying pharmaceutical companies that have lots of cash on hand and may see an increase in sales of core prescription drugs.
• SPDR S&P Pharmaceuticals (NYSEArca: XPH): up 19.2% year-to-date; XPH is more broadly diversified.
• iShares Dow Jones US Pharmaceuticals (NYSEArca: IHE): up 22.2% year-to-date; IHE focuses more on the oversold traditional pharma brands like PJP.
• SPDR S&P Biotech (NYSEArca: XBI): down 4.3% year-to-date; XBI is well-diversified, with 45% of its funds invested in its top 10 holdings. The fund is also mostly invested in nontraditional pharma companies.
• iShares Nasdaq Biotechnology (NasdaqGM: IBB): up 11.2% year-to-date; IBB has a higher weighting in its top holdings and it focuses exclusively on Nasdaq-listed securities; some large biotech companies may be excluded.

Clean energy. It is no secret that clean energy is a big policy initiative of the Obama administration. The more notable technologies being pushed into the forefront of the sector are nuclear and solar energy. Solar tech investing is still considered risky because of the industry’s mini boom/bust cycles, but ETFs help minimize volatility.

• Market Vectors Solar Energy ETF (NYSEArca: KWT): down 6.5% year-to-date
• Claymore/MAC Global Solar Energy (NYSEArca: TAN): up 0.3% year-to-date
• Market Vectors Nuclear Energy ETF (NYSEArca: NLR): up 19.7% year-to-date

Max Chen contributed to this article.

Comments

[ncalmd:]

I would caution someone looking at increases in brand name pharmaceuticals, that the newly insured population will not likely add as much volume to the pharmaceutical as might be expected.

Many of the uninsured, pay cash to see physicians, and pay for their medication out of their own pockets. More importantly, if you are uninsured and complex/severe medical problems, it doesn't take very long to exhaust your resources., and end up on Medi-caid. Those uninsured who haven't seen physicians are likely to be healthy or have medical conditions like hypertension, high cholesterol, mild or moderate lung disease, and diabetes that haven't been diagnosed or are being undertreated. I would not anticipate significant increase in brand name hypertension or cholesterol medications, but there would be some increase in the use of brand name asthma medications, over a few years an increase in brand name diabetic medications. Other than those, I can't think of other classes of medication would see a significant change in volume, or I should say less than might expected.

The same is true for medical device makers. There are few if any "optional" medical devices. In other words, if the medical device is necessary, it will be used whether a patient is insured or uninsured. I'm sure there must be some devices that are optional, but can't think of one at the moment.

Hospitalizations are also not likely to rise by much. If you are sick enough to need hospitalization, you end up hospitalized and receiving standard treatment whether you are insured or not. While there will be some increase, it will be small.

Finally, while I have no idea what the final legislation will look like, I think it's safe to presume that the largest numbers of newly insured will be the young who have very few medical problems.

Nov 15 09:12 AM

[NEOCON47:]

I do not see you contemplating our new administration setting up Marxists, Communists and Socialists protocols.

If that were the case do you believe that you will be able to invest freely anymore?

Nov 15 09:16 PM