A Navy SEAL Talks ETFs

Last month, I had the privilege of attending one of the best conferences in my industry, the Inside ETFs Conference held in Hollywood, Florida.

This year, the conference featured a most-unusual keynote speaker, former U.S. Navy SEAL Rob O’Neill. If you recognize the name, you probably also know that O’Neill is credited with perhaps the most famous kill shot in recent U.S. military history — the head shot that terminated Al-Qaeda leader and 9/11 mastermind Osama bin Laden.

O’Neill wasn’t allowed to provide details of that operation, but he did share other anecdotes from his days in the ultra-elite SEAL Team Six, a unit that is so secret its existence is officially denied.

The former special warfare operator related stories of heroism, teamwork, incredible adversity and uncommon valor on the part of his teammates and fellow warriors. Yet he wasn’t doing this just to impress those of us in attendance with his exploits.

The real reason Rob O’Neill was asked to speak at the Inside ETFs Conference is because the lessons you learn in battle also can be applied to your personal relationships, your business — and especially to your investing.

Concepts such as the importance of teamwork, the importance of flexibility and creativity, and, of course, the courage and conviction to make strong decisions and to accept responsibility for the outcome (good or bad) all are necessary conditions for successful human interactions.

All can apply to one’s own particular business, and all do apply to being a good investor.

Interestingly, my takeaway here also applies to the exchange-traded fund (ETF) industry.

Like any good warrior on a mission, the ETF industry involves teams of hard-working experts joining together to meet a goal. There also is a lot innovation and creativity involved in bringing new products to market, and in implementing new ideas and strategies that allow investors to achieve their objectives.

So, in the spirit of focus, teamwork and creativity of the sort that Navy SEALs employ in battle, and that the ETF industry employs in its battles, over the next five or so weeks we will be taking a look at many of the interesting new ETFs I learned about at the Inside ETFs conference.

From new biotech ETFs to new emerging market funds, and from actively managed income ETFs to international consumer ETFs, the innovation just keeps on coming.

Hey, there is even a new series of ETFs created by Kevin O’Leary, “Mr. Wonderful” who is one of the featured “sharks” on the Shark Tank television show that lets entrepreneurs pitch their fledgling products to wealthy investors who can make offers to buy a stake in a business or reject it.

If you’re like me, you love being inspired by people who show you what’s possible in life, and you also love learning about the new tools available in the market that give you the best chance to achieve market-beating returns.

That’s what we have for you today, and in the weeks to come, so let’s get started on that mission right now.

ETF Talk: Introducing a Unique Biotech Products Fund

This week’s ETF Talk focuses on an ETF that sets itself apart from the pack as a biotech offering that’s just a bit different from anything else on the market. Biotech is a very hot and interesting sector, and it has become known in recent years for its potential for powerful growth. This fund, BioShares Biotechnology Products ETF (Nasdaq:BBP), features more established biotech companies that have much clinical trial failure risk behind them.

BBP buys shares of companies that already have successfully completed multiple human clinical trials and have received Food and Drug Administration (FDA) approval to sell and market a drug. The management teams of companies included in BBP thereby devote more of their energies toward educating patients, physicians and insurance providers to spur sales and profit growth.

BBP owns shares in “products stage” companies that are not vulnerable to the risk that clinical trial failures could doom their business prospects, unlike some start-up biotech companies that might need successful clinical trials to survive. In addition, BBP targets companies with products aimed at saving lives. Those companies already have FDA-approved products on the market or will be cleared to launch once infrastructure for production is in place. The fund seeks investment results that correspond, before fees and expenses, to the price and yield performance of the LifeSci Biotechnology Products Index.

The principals of BBP are founders of and/or are affiliated with LifeSci Advisors, a unique investor relations consultancy. Andrew McDonald, Ph.D., is a co-founder of LifeSci Index Partners and co-portfolio manager of BioShares funds who began his career as a medicinal chemist at Pfizer (NYSE:PFE). Paul Yook, a former health care hedge fund portfolio manager, also is a co-founder of LifeSci Index Partners and is the portfolio manager of BioShares funds.

Despite huge long-term promise of biotech, BBP has fallen with the rest of the sector and is down 26% during the last 12 months. Much of the drop occurred in January when the overall stock market pulled back. Not only has biotech taken a serious beating recently, so have companies whose shares are held by BBP. The fund has an expense ratio of 0.85%, which is on the expensive side for an ETF, but it does offer a 1.65% current yield. Net assets are just $17 million, but it is less than two years old and has a fairly narrow niche. Its current smallish size puts it beneath my recommended threshold for investment. However, this ETF’s strategy is one that is worth bringing to your attention. The more knowledge you have as an investor, the better you can make informed decisions.

Top holdings for BBP include Theravance Biopharma, 3.41%; Amgen, 3.38%; Biogen, 3.34%; Enanta Pharmaceuticals, 3.31%; and Acorda Theraputics, 3.30%. The total weighting for its top 10 holdings amounts to 32.87%.

View the current price, volume, performance and top 10 holdings of BBP at ETFU.com.

Although the fund’s current price is quite depressed, when global stock markets recover, this fund could be a major beneficiary. If any of this piques your interest, I encourage you to learn more about BioShares Biotechnology Products ETF (BBP). Watch for my column next week when I feature a different BioShares fund, BioShares Biotechnology Clinical Trials Fund (BBC).

Wolfe on Background

“You never realize how much of your background is sewn into the lining of your clothes.”

— Tom Wolfe

The novelist, whose most famous work is perhaps “The Bonfire of the Vanities,” reminds us here that our backgrounds really do have a lot to do with how we live our lives. If you are like me, and feel fortunate enough to have a fantastic family background, then I recommend celebrating that fact every chance you get.

Wisdom about money, investing and life can be found anywhere. If you have a good quote you’d like me to share with your fellow readers, send it to me, along with any comments, questions and suggestions you have about my audio podcast, newsletters, seminars or anything else. Ask Doug.

I encourage you to read my column from last week about how to leverage the stock market’s periodic upswings. I also invite you to comment about my column in the space provided below my Eagle Daily Investor commentary.

All the best,

Doug Fabian