Obesity is an increasingly problematic issue, especially among the richer western countries. It is caused by genetic, environmental, and dietary factors.
A staggering 42% of the US population is considered obese, a problem that the country and its people are struggling to deal with.
Problems like these create opportunities for innovative minds. One such innovation was witnessed last year when Novo Nordisk launched the first weight loss drug.
This sparked a weight loss revolution that prompted many drug companies to accelerate research on their own weight loss drug. Today, most companies have their own variant and continue to improve their research in the field.
Investors around the world consider this revolution a great money making opportunity. But picking stocks is a dangerous game, especially in the biotech sector.
Just like obesity gave rise to the weight loss drug, the risks of stock picking gave birth to the Exchange Traded Funds.
Today we look at one of those funds: the Tema Obesity & Cardiometabolic ETF (NASDAQ:HRTS)
Tema Obesity & Cardiometabolic ETF
The HRTS ETF focuses on treatments for obesity as well as cardiometabolic therapies. Despite being relatively new to the market, the ETF has fared well against its more established peers. This shows there is enough room for new ETFs in the market and a bet on a newer entry can pay dividends.
The HRTS is also unique in the sense that it doesn’t just cover obesity from the weight loss perspective. It also includes companies dealing in medical devices, insurance, supply chain, and cardiometabolic therapies.
In short, multiple different businesses that are likely to benefit from treating obesity are included in this ETF.
The ETF is further diversified by exposure to three different types of companies. There are established high growth players like Eli Lily and Novo Nordisk. Then there are stable cash-flows rich companies like Amgen.
And at last, the ETF gives exposure to high-risk biotech startups. Biotech startups are an extremely risky investment and therefore a high degree of knowledge is required to identify these companies. The fact that this ETF takes on the challenge shows the confidence and capabilities of its management.
When should you enter?
The US stock market is just taking a breather after hitting all-time highs. The HRTS ETF is doing the same as shown in the chart below.
The AI rally has over extended the market but on a deeper look, its mainly the technology stocks that have lead the way while the rest of the market has stayed relatively flat. Tech stocks are currently taking a heavy correction.
If that continues, investors may get a better entry price. However, considering the hype around weight loss drugs, the HRTS is unlikely to come down much lower. Hence, investors may want to start taking position in the ETF.
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