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iShares Genomics Immunology and Healthcare ETF (NYSEARCA:IDNA) is a healthcare exchange traded fund (ETF) launched by BlackRock, Inc. in June 2019, i.e., less than three years back. This ETF is managed by BlackRock Fund Advisors and has an Asset Under Management (AUM) of $209 million. It invests in public equity shares in all the major stock markets worldwide, with 60 percent investments in the US stock market. This ETF has around 11 percent investments in the Japanese stock market and 24 percent investments in European equity markets.
iShares Genomics Immunology and Healthcare ETF primarily invests in biotechnology and pharmaceutical stocks. It has also invested around 3 percent in a dividend fund, namely Eaton Vance Tax-Advantaged Dividend Income Fund (EVT). IDNA benchmarks the performance of its portfolio against the NYSE FactSet Global Genomics and Immuno Biopharma Index. This index is composed of developed and emerging market companies that could benefit from the long-term growth and innovation in genomics, immunology, and bioengineering.
iShares Genomics Immunology and Healthcare ETF is a relatively new ETF, launched less than three years ago, and is operating with an expense ratio of 0.47 percent. This ETF is not meant for income-seeking investors, as it intends to pay semi-annual dividends, but with a very low yield. The average year-end yield of the past three years has been less than 0.6 percent. Thus, the investment decision will solely depend upon the expected future performance of the fund over the long run.
iShares Genomics Immunology and Healthcare ETF has performed poorly over the past 12 months. IDNA has recorded a negative growth of around 9 percent, 40 percent, and 38 percent over the past three months, six months, and 12 months, respectively. We all know that the biotechnology sector had an extremely poor last six months in 2021. Still, for a growth-seeking ETF to generate a negative return of that high percentage may make the investors skeptical.
An analysis of IDNA's top 30 common equity holdings (holding 90 percent of the entire portfolio) reveals that most of its investments are in biotechnology stocks. Out of these 30 equities, 24 biotechnology stocks (22 are listed in the US stock market) are holding more than 60 percent of its total portfolio.
Only five stocks are from the pharmaceutical sector, holding around 26 percent of its total portfolio. Incidentally, all these five stocks are listed outside the United States. One of IDNA's top holdings (3.85 percent of total portfolio), Maravai LifeSciences Holdings, Inc. (MRVI), belongs to the life sciences tools & services industry.
Barring Regeneron Pharmaceuticals, Inc. (REGN), all the biotechnology and life science companies listed in the New York Stock Exchange (NYSE) have recorded negative price growth over the past 12 months. This explains the massive loss of IDNA's price over the past one year. Another company, Exelixis, Inc. (EXEL) recorded positive price growth over the past six months.
Another three stocks - Maravai LifeSciences Holdings, Inc., Iovance Biotherapeutics, Inc. (IOVA), and Genmab A/S (GMAB) - recorded double-digit positive growth in the past three months. Thus, this ETF seems to be slowly recovering from the steep downfall in the second half of 2021. Still, it has a long way to go, as 20 such companies are yet to recover themselves.
iShares Genomics Immunology and Healthcare ETF, however, has posted a price growth of 22 percent since its inception in June 2019. This suggests that this ETF has performed very well in the first two years of its operation, and the stocks included in this ETF are quite volatile. There are other genomic revolution funds like Invesco Dynamic Biotechnology & Genome Portfolio ETF (PBE), Global X Genomics & Biotechnology ETF (GNOM) and ARK Genomic Revolution ETF (ARKG), which also performed poorly last year. The similar trend is visible in most of the funds - huge price loss in the past 12 months, but positive price gain since June 2019 (the time when IDNA was launched).
Despite the market price falling by 61.1 percent in the past one year, ARKG registered a growth of 3.3 percent over the past three years. PBE's price also fell by 25.3 percent in the past one year but grew by 7.8 percent over the past three years. Only GNOM failed miserably and recorded a negative growth of 44.5 percent and 13.9 percent growth over the past one year and three years, respectively. During the same period, S&P 500 OTC:GREW by 4 percent and 53 percent, respectively.
Weighted average Price to Equity ratio of the component stocks of iShares Genomics Immunology and Healthcare ETF comes to around 14.29, compared to the index's Price to Equity ratio of 16.67. IDNA's Price to Book ratio is 2.23, compared to the index's Price to Book ratio of 3.98. This suggests that the ETF is slightly undervalued. This assumption gets further validation as the price/sales of 1.27, and price/cash flow of 9.7, is relatively lower than the index (Price/Sales of 1.64 and Price/Cash Flow of 13.35).
However, the iShares Genomics Immunology and Healthcare ETF is currently trading at only 3 percent premium over its 52-week low, and there is scope for a further downward rally of this fund, as indicated by the simple moving averages (SMA). The long-term moving averages of this fund are placed significantly higher than the short-term moving averages. As of 28th April 2022, the 200-day SMA (43.67), 100-day SMA (36.73), 50-day SMA (33.54) and 10-day SMA (31.82) are indicative of a bearish rally for this ETF.
Thus, there lies every possibility of stiff downward movement with every downward trend in the market. Moreover, being a theme-based biotechnology index fund, IDNA cannot overcome its inherent volatility and market risk, which may arise due to changes in investors' sentiment or any negative news about its constituent stocks or the sector as a whole. The possibility of most of the stocks in its portfolio generating positive returns will take time, maybe another six to nine months. However, a course correction for IDNA is very much possible, too, if the biotechnology sector gets some positive boost or gets into any bull run.
In my opinion, iShares Genomics Immunology and Healthcare ETF can only be considered as a medium or long-term investment option. Genomic revolution has good growth prospects, which may enable these biotechnology stocks to generate supernormal growth. Moreover, a few of the biotechnology stocks that IDNA holds have started generating positive returns. Besides, the pharmaceutical stocks listed in other equity markets have always maintained a good return.
The overall price growth since the inception of this fund is quite impressive, considering the huge impact of Covid-19 pandemic in the US equity market. Although the portfolio of investments is expected to generate positive return in the medium term, iShares Genomics Immunology and Healthcare ETF is a better prospect for long-term growth-seeking investors. However, it is advisable that such long-term growth seekers hedge themselves with put options, in order to protect their investments from likely downward movements, which may happen from time to time.
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IDNA: A Long Term Prospect, Slowly Overcoming The Bearish Rally - Seeking Alpha
