Healthshares Enabling Technologies - NOT
One long overdue item I've been meaning to go over and blog about is an ETF breakdown on HHV - Healthshares Enabling Technologies ETF. I really like companies focused on enabling technologies in biotech. These are generally profitable pick and shovel makers that benefit from the interest in biotechnology, but are not reliant on any one drug approval or FDA action. In fact, the trend is to use as much tech as possible.
So, despite being bearish on these funds in general, largely due to the stupidity of having such a narrow market segment ETF that rebalances quarterly, I'm bullish on the concept in general. This means that there should be plenty of companies in this ETF to give the thumbs up to, then end the bear call on the index itself (which has been a wrong call - not too surprisingly). I recently (OK, it was quite a while ago with HHD - Healthshares Diagnostic ETF. That breakdown gave me a good set of companies that have gone on to do quite well for my CAPS port.
But…. this breakdown won't be quite the same. That is because when I went to look deeply at the holdings of HHV, it resulted in a spit take. Are they kidding me - this is what they classify as enabling technologies in Biotech. My low opinion of this ETF just went lower.
Here is the makeup.
Illumina Inc. (ILMN)
Sangamo Biosciences (SGMO)
Cambrex Corp (CBM)
Cepheid Corp (CPHD)
Sigma-Aldrich Corp (SIAL)
Symyx Technologies (SMMX)
Millennium Pharmaceuticals (MLMN)
Invitrogen Corp (IVGN)
Luminex Corp (LMNX)
Perkin Elmer Inc. (PKI)
That's it. 10 companies. I am so willing to keep an underperfrom on an ETF that holds only 10 companies and robotically rebalances regularly. But not only that, I don't really understand the holdings. Sure some make sense, but others are questionable. There are glaring omissions as well.
Here is what they say.
"Companies included in the Enabling Technologies Index provide technology products and/or services that enable and support the discovery, clinical development and manufacturing activities of pharmaceutical and biotechnology companies, including but not limited to genomics, proteomics, and high throughput screening. The companies in the universe are selected using a proprietary methodology developed by XShares Group LLC designed to identify companies in a specific healthcare vertical or sub-sector."
Well, the first sentence can mean an awful lot of companies, including just about any that assit with clinical trials (I'll leave those out). The second could exclude just about any. Where are Affymetrix, Thermo-Fisher, Beckman Coulter, Millipore, Pall, Metler-Toledo, …..etc. Without any effort at all I can double the companies that should be here.
How is Millennium an enabling technology company? It might still have the remnants of a service industry, but it’s a drug developer now (good one too). Heck GE and Agilent are better candidates for this index in my opinion than Millennium. And Cepheid, which is primarily a diagnostics company, how do you include them and not Applied Biosystems, Bio-rad, or Celera.
This is a stupid index - no way around it. I really don't like Healthshares, the thumbs down stays!
It will have to be another post that talks about the merits of the listings.