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Biotechnology ETFs
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About Biotechnology ETFs |
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Technology (Biotechnology) ETFs Overview and forecast
It would be fair to say that the economic meltdown got in the way of what could have been one of the great market sagas of a class of stocks that took the world by storm. Biotechnology, particularly since the advent of the Genetic Revolution, for want of a better phrase, has been sweeping the scientific world, generating new products and patents like nothing before it.
This sector is undergoing events which may be the equivalent of the invention of fire. The investment environment is like the Wild West, patenting products which have never before existed. Biotechnology ETFs are a mix of possibilities and sometimes hype.
However, the real big deal about biotech is commercial applications and paying propositions. The sector has great hopes and great science, but the facts in terms of investment are a bit less starry eyed. The sector did no better than any of the others, despite its status as flavor of the future. Big capital didn't hang around in the market, and the index went down sharply during the meltdown.
It didn't do as badly as some, but the Biotechnology ETFs index isn't really handling huge volumes of capital, compared to others. These funds aren't heavily traded by comparison, either. So the Biotechnology ETFs sank in line with everything else. They've been performing indifferently since, too. The sector is considered a risk taking sector, and risk, need it be said, isn't too popular with the markets at the moment.
Short term (6 months)
Unless there's some real stimulus to investment, Biotechnology ETFs will plod along, doing a bit better as the market improves. Science is a long term investment, often taking up to 10 years to get moving as a paying concern. This is quite normal for the sector. Some of the world's big biotech companies spent years as low value investments before arising to heavyweight, credible index leaders.
The problem for the Biotechnology ETFs is that they're not likely to be doing much in the short term to attract investment. Their own nature is part of the problem. They're a strange anomaly in the ETF market. Many of them are holding the same assets, and the turgid results over the last 12 months are no incentive to buyers. Those looking for longer term values will be more interested.
Medium term (2 years)
In the medium term, the only certainty is that the good performers will become a lot easier to identify. The returns will tell the tale very convincingly. Low volumes of trade aren't attractors to investors or traders, and the Biotechnology ETFs will have to function on less cosmetic elements for their credibility. Actual contracts, for example, will say a lot more than endless transparent waffle and apologia about projected Net Asset Values after acquisition of new holdings.
ETFs are not really helped by analyses of the values of their holdings at a distance from the investor's-eye perspective. It misses the point that the ETFs themselves are supposed to be delivering for their holders. The medium term period for this sector is a break in period. The ETFs, and their holdings, are in evolution, and not well defined as investments. Biotechnology ETFs are subject to the laws of commerce, rather than market metaphysics. They do have to deliver.
Long term (5 years)
The evolution process will ultimately produce real investment material. The companies, their products, and the markets, will understand each other better. Enough time for strategic investment and big capital involvement will produce a much clearer concept of the sector and its investment and trading patterns.
The pig in a poke phase of the Biotechnology ETFs will be either over, or well on the way to being over. In the short and medium terms, particularly during a ferocious bear market, throwing money at the Biotechnology ETFs is neither likely nor believable as a basis for investment.
The Biotechnology ETFs themselves will be better organized, better defined as investments, and have greater diversity among themselves. The current situation of buying one of several nearly identical underperforming ETFs will be over, too.
Qualifier to projections
Not unlike other historically "fashionable" stocks, the Biotechnology ETFs have their pitfalls and perils. There are real risks, and they must be considered. The consideration here is that the biotech stocks do take off, at least in trading terms, before the big money comes in. Bubbles, however, are also possible, resulting in inflated prices, and basically ephemeral investments. Those who remember the "dot com" boom with loathing will be in no hurry to repeat the performance.
Good, bona fide science and investment opportunities do exist throughout the technology and biotechnology sectors. The only way to find them is through good, thorough research. These are potentially excellent investments, backed up by credible organizations and capital. Risk is manageable, and relatively low. In the case of the Biotechnology ETFs, individual patents, products, and corporations are the defining factors, at this stage. The "sector" is extremely diverse, and so are its products and entities. A strong degree of familiarity with the business, science, intellectual property, and commercial realities is required.
Later, when the Biotechnology ETFs have outgrown their current state of under development, under capitalization, and lack of diversity among themselves, they will be interesting, and in many cases, rewarding, investments. Until that time, investors are advised to use caution and skepticism, and to distrust intensely any market rumors, particularly trader-derived gossip.
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Last Updated on: 2010-01-14 02:03:40 |
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