ETF Expert: Forgotten Pharma May Bounce Back With Swine Flu Fears
12 June 2009 at 10:30 am by Gary Gordon
On Thursday, 6/11/09, the World Health Organization (WHO) labeled the swine flu with the fear-provoking word, "pandemic." It's the first time that the label has been attached to a strain in more than 40 years.
The swine (pig) flu has been diagnosed in 30,000 cases worldwide, resulting in 144 deaths. It seems to have surpassed its predecessor, avian (bird) flu, in both coverage, concern and incidence.
(Quick aside… fans of "It's Always Sunny In Philadelphia" probably can't resist imitating Danny DeVito. "We can cover a major pandemic… bird flu, fish flu.")
While there's nothing laughable about a virus that can't be contained yet, there are potential financial implications. For instance, one of the worst performing sectors in 2009 has been pharmaceuticals. In spite of the sector representing cash-rich mega companies with actual earnings growth, investors have avoided the former safe haven like the plague.
Yet guess which area is sporting the best gains from Thursday through mid-day, Friday, 6/12/09? Pharmaceutical HOLDRS (PPH), iShares Global Health Care (IXJ) and SPDR Pharmaceuticals (XPH) are handily outhustling the broader market.
In a bit of a twist, global health care is performing nearly as well as big pharma. That's because the iShares S&P Global Healthcare (IXJ) has more international exposure to the worldwide "pandemic." Even though IXJ does not merely hold the drug providers, IXJ does hold international pharmaceutical leaders in the vaccine business (e.g., Novartis).
On the flip side, some investments may be adversely hit by the recent news. Consider the DJ Livestock ETN (COW). As if it's performance hadn't already been beaten down in 2009 by a 1/3 exposure to hog futures, it may continue to struggle if "swine flu" fears persist.
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Disclosure Statement: ETF Expert is a web log ("blog") that makes the world of ETFs easier to understand. Pacific Park Financial, Inc., a Registered Investment Advisor with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.
