Invesco Dorsey Wright Healthcare Momentum ETF

PTH

Market cap $113M

Investors are questioning the staying power of medical technology (medtech) stocks, which have fallen from grace since the COVID-19 pandemic. The starting point is to distinguish between medtech and other healthcare industries.

After a 50%+ run from lows last April through highs in mid-January, the Biotech group has been trending sideways over the last few months. Biotech hasn't garnered much attention lately, with all the coverage of the Iran War and the AI Doom trade that's been taking down software stocks even as AI infrastructure stocks continue to surge.

The healthcare sector has experienced one of its most significant de-ratings in 35 years, with valuations now at a 30% discount to the broader market. Healthcare trades at historical valuation discounts across multiple metrics.

The U.S. Food and Drug Administration's recent enforcement action against drug promotion is sending ETFs with exposure to weight-loss treatment manufacturers into question.

Outlook for pharma sector as Trump pushes for regulatory changes. The impact of tariffs on drugmakers.

PTH is comprised of 30+ Health Care stocks selected based on a proprietary momentum-based model. Its expense ratio is 0.60% and the ETF has $115 million in assets under management. The strategy relies on technical analysis, but that's not necessarily the issue. Instead, PTH reconstitutes quarterly, forcing managers to wait to buy stocks only after they've made their massive gains. PTH's current holdings illustrate this point perfectly. Although they've gained 51% over the last six months, the ETF itself has declined by 12% over the same period.

Investors cooled to the healthcare sector in 2024, which dramatically trailed global and US equity markets for the year. any investors are now asking: how will the policy changes under a new US administration affect healthcare companies?

The current dip has made many ETFs attractive, and we call them "Secret Santa." These could surprise investors with big returns this Christmas.

Sometimes it feels like it's Nvidia's world and we all just live in it. Why bother with anything else?

PTH tracks the DWA Healthcare Technical Leaders Index, selecting U.S. Health Care stocks based on a proprietary relative strength measure. There are about 300 U.S. Health Care stocks in the selection universe. The Index only requires 30, and any point, you'll see many early-stage firms delivering exceptional short-term returns. As a result, PTH holds mostly small-cap stocks with huge recent price gains. However, the flaw is its passively-managed approach that rebalances and reconstitutes on a fixed quarterly timeline.