Tag Archives: alternative

The First Cancer Immunotherapy ETF

Investors can target immunotherapy cancer treatment companies through a new ETF. A look at the Loncar Cancer Immunotherapy ETF. Provides exposure to a quickly growing segment of the biotechnology space. With the advancements in biotechnology generating some attractive investment opportunities, exchange traded fund investors may now focus on a group of companies that specialize in the growing field of cancer immunotherapy. The Loncar Cancer Immunotherapy ETF (NasdaqGM: CNCR ) began trading Wednesday, October 14, according to a press release . CNCR has a 0.79% expense ratio. “Immunotherapy is changing the way many cancers are being treated,” Brad Loncar, Chief Executive Officer of Loncar Investments, said in the press release. “This innovative field within biotechnology is expected to become the foundational treatment for cancer over the next ten years. We think it is important to give investors a benchmark to track the progress of this growing biotechnology sector, which over time will likely continue to have a positive impact on society.” CNCR tries to reflect the performance of the Loncar Cancer Immunotherapy Index, which was developed by biotechnology investor Brad Loncar. The underlying index tracks large pharmaceutical and growth-oriented biotechnology companies in the cancer treatment space. Specifically, the index tracks companies that are developing new classes of therapies, like checkpoint inhibitors, next generation vaccines and chimeric antigen receptor (CAR) technologies. “Biotech stocks tend to get grouped together as a whole, yet areas like immunotherapy trade on their own unique circumstances and innovations,” according to Loncar Investments. “While traditional medicines like chemotherapies often give cancer a broad punch, the benefit of using immunotherapy is derived from the immune system’s dynamic nature and the way it can more precisely be tailored to fight a patient’s disease.” The underlying index first selects seven top large pharmaceutical companies working on immunotherapy for their strategic focus on cancer treatment and their leadership role in the field. Additionally, the index picks the top 23 growth biotechnology companies in immunotherapy by market capitalization. The cancer index is then equally weighted. The index also screens companies for a number of factors, including drugs approved by either the FDA or EMA that harness the immune system to fight cancer, drugs in the human stage of testing that harnesses the immune system, intentions to begin human stage testing of a drug that harnesses the immune system to fight cancer, or announcement of an immunotherapy collaboration or partnership with a major pharmaceutical company. Top holdings include Ziopharm Oncology (NASDAQGS: ZIOP ) 4.9%, Kite Pharma (NASDAQGS: KITE ) 4.7%, Celgene (NASDAQGS: CELG ) 4.7%, Pfizer (NASDAQGS: PFE ) 4.5% and Bristol-Myers (NASDAQGS: BMY ) 4.4%. “The Loncar Cancer Immunotherapy ETF allows investors to participate in the breakthrough in this well-defined sector in a diversified way,” J. Garrett Stevens, CEO of Exchange Traded Concepts, said in the press release. A cancer-themed ETF is not new to the ETF industry. Previously, ETF investors could tap into this segment of the biotech industry through the HealthShares Cancer ETF ( HHK ), but the fund closed in 2008. Additionally, XShares, the fund provider of the HealthShares line, was sold to a unit of Deutsche Bank in 2010. Max Chen contributed to this article . Disclosure: None.

Refined Approach To Energy ETFs

Oil refiners could outperform in energy space. Widening spread between crude and refined products help support refiners. An ETF option that tracks some strengthening oil refineries. In the energy space, oil refiners and sector-related exchange traded fund could outpace the big oil and services names as refineries capitalize on the cheap crude oil and higher prices on refined products. Investors interested in tracking the oil refinery space can take a look at the Market Vectors Oil Refiners ETF (NYSEArca: CRAK ) , which began trading in August. CRAK has gained 3.6% over the past month. “Refiners have been the lone bright spot in the energy sector during the past year, handily outperforming every other subsector,” writes Allen Good, who is a senior equity analyst for Morningstar . “While oil prices have deteriorated, refining margins have improved, thanks to strength in gasoline margins due to key refinery outages and strong demand.” Gasoline demand, which is nearing its 2007 record high, and supply disruptions from refinery outages have bolstered gasoline margins about 50% this year. While we are at the end of the summer driving season, Good expects demand growth outside of normal seasonality, thanks to help from cheap oil prices. Good also projects improved earnings in the refining space as short-term investments. Oil refiners have not taken large, capital-intensive expansions or acquisitions. Instead, companies have capitalized on the availability of discount crude and natural gas or improving yields. “These projects typically require much less capital (processing capacity is much cheaper for light crude than heavy crude), have short payback periods, and generate attractive returns,” Good added. “Thanks to the completion of many of these projects, as well as improved operating performance, refiners can generate earnings growth in a flat-margin environment.” For example, Tesoro (NYSE: TSO ) shows ongoing improvement and is adding integration programs in California. HollyFrontier (NYSE: HFC ) is investing in improvement projects. Marathon Petroleum (NYSE: MPC ) added increased condensate processing, distillate production and exports. Western Refining (NYSE: WNR ) invested in logistics projects. CRAK includes a 5.5% tilt toward TSO, 5.0% in HFC, 6.9% in MPC and 3.4% in WNR. Refiners are also investing in midstream assets, which can provide earnings and achieve higher midcycle returns, with less volatility, Good said. Furthermore, many refiners have generated free cash flow, which have been returned to shareholders through dividends and share buybacks. While yields have remained relatively low, dividend growth is picking up. CRAK’s underlying index shows a 30-day SEC yield of 1.51%. Disclosure: None. Max Chen contributed to this article .

VNQI: International REITs For Diversification

Summary The Vanguard Global Ex-U.S. Real Estate ETF offers investors a fairly unique risk exposure. To improve portfolio diversification, ETFs like VNQI make sense as a small allocation. The best way to establish international diversification, in my opinion, is to focus on the map. Rather than focusing just on emerging vs developed markets, investors should look at the individual countries to ensure proper diversification. Investors should be seeking to improve their risk adjusted returns. I’m a big fan of using ETFs to achieve the risk adjusted returns relative to the portfolios that a normal investor can generate for themselves after trading costs. One of the funds in my portfolio is Vanguard Global ex-U.S. Real Estate ETF (NASDAQ: VNQI ). I’ll be performing a substantial portion of my analysis along the lines of modern portfolio theory, so my goal is to find ways to minimize costs while achieving diversification to reduce my risk level. When I first looked at VNQI, it seemed like a great way to add a very unique exposure to my portfolio that would be not be duplicated by any of my other holdings. Since then, my perspective has been changing. This is still a good fund, but I think I weighted it too heavily in my portfolio. Expense Ratio While Vanguard funds are known for low expense ratios, this is ETF has the highest expense ratio of any of my holdings at .24%. I accepted that higher expense ratio strictly because I wanted the highly unique exposure and there are only a few liquid competitors in this niche of the market. Regions The following chart breaks down the regional exposure of the ETF. It is a useful chart, but it is remarkably vague about the specific exposures. For instance, I can tell that this fund offers me some emerging market exposure, but I can’t tell exactly which countries we are talking about. If an investor wants to ensure that their international diversification is giving them the full benefits of diversification, they will want to check the individual country allocations. Country Allocations I grabbed the following chart from Charles Schwab: (click to enlarge) This map is much easier for me to read. The allocations look fairly reasonable. Japan certainly appears to have a high weight relative to the amount of actual land there, but the country has a very developed market and makes sense as a key holding for the portfolio. As we go down the list the allocations to individual countries begin to rapidly decline which is another favorable factor in my opinion. Since the inclusion of the ETF is intended to diversify my portfolio, I want a diversified group of holdings. As you’ll see in the holdings section, the individual holdings are low enough in weight that the country allocations may be a larger factor than the individual holdings which include many companies you’ve probably never researched. Highlights Since I was a big bear on China, I like to see China with a lower weight in my international investments. After fierce selling and the falls we saw over the last couple months, the strength of my conviction is weakening and I’m more willing to accept exposure to China in my portfolio. I don’t think I’m to the point of actively seeking it, but I can deal with about 8.7% to China and 8.7% to Hong Kong. Missing Allocations Notice that only one small part of Africa is present and there are no allocations to Latin America. If you’re trying to build a thoroughly diversified international position for the portfolio, it would be wise to consider including ETFs that have these areas. That doesn’t mean investors should avoid VNQI, it just means the ideal compliments to VNQI will likely include exposures to Africa and Latin America. REITs The other thing investors should remember is that this international allocation is investing in REITs. In the domestic market REITs and regular equity markets can diverge quite substantially over years so investors would be wise to consider including allocations to the normal corporate international market. Holdings I built the following chart to represent the top 10 holdings. If you don’t recognize several of these names, don’t worry. I don’t recognize them either and I’m holding quite a bit of VNQI. I selected the ETF because of the country allocations and the REIT structure rather than the individual companies. (click to enlarge) Conclusion The Vanguard Global Ex-U.S. Real Estate ETF offers investors a fairly unique risk exposure. The fund is best used as part of a diversified portfolio and it should not be the only international equity ETF in a portfolio. I would favor complimenting the ETF with other funds that offer exposure to Latin America or Africa as well as some normal equity exposure to other develop markets.