2nd Sep 2020
ETF Trends CEO Tom Lydon discussed the Defiance Nasdaq Junior Biotechnology ETF (IBBJ) on this week’s “ETF of the Week” podcast with Chuck Jaffe on the MoneyLife Show.
IBBJ covers companies around the globe that are focused on various areas within the biotech or pharmaceuticals space. Included companies are those involved in genomics, DNA technology, genetic engineering, and molecular biology, as well as pharmaceutical manufacturers of prescription or over-the-counter drugs. Its emphasis on pharmaceuticals makes IBBJ to differ from some peer funds and its segment benchmark. The underlying index concentrates its exposure to approximately 200 small-cap stocks that are exclusively listed on the NASDAQ Stock Market. Stocks selected must meet certain size and liquidity requirements. The index is market-cap weighted with an 8% single security cap for five securities, and the excess is allocated proportionally across the rest. The index’s rebalance, and reconstitution occurs semi-annually.
Targeted exposure to junior disruptors in the biotechnology space as drugmakers focus on specialized or targeted drug applications. The play on innovations comes out of smaller companies. That also means there’s a play on potential increased merger & acquisition activity. As big blockbuster drugs see patents expire, many big-named companies are now looking for merger/acquisition targets through smaller specialty drugmakers.