There may be more reasons to invest in individual stocks than exchange-traded funds in the weight loss space.
Amplify ETF and Roundhill Investments each filed a prospectus last week to launch funds focused on weight loss companies, a move that Strategas ETF and technical strategist Todd Sohn believe depends on the performance of two dominant stocks: Novo Nordisk (NVO) and Eli Lilly (LLY).
“The major holdings will be Lilly and Novo Nordisk, and probably one or two other big names… along with some of the supply chain manufacturers,” he told CNBC's “ETF Edge” this week. “Ultimately, it depends on those big giants who use those drugs.”
With only two players currently at the forefront of the US anti-obesity drug market, ProShares' Simeon Hyman questions the relevance of weight loss ETFs for investors looking to participate in the industry.
“I think that's one of the challenges whenever you see an innovation like this,” the company's global investment strategist said in the same interview. “If the profits are going to the headlines, then perhaps there isn't an issue per se that needs to be exploited.”
Strategas' Sohn also suggested that ETFs based on themes, rather than sectors or indices, could be falling out of favor with investors.
“I think the themes are a little bit on the back burner right now, especially the way they've performed the last few years. I think there's room for them, but more than one, it's going to be difficult,” he said.
So far in 2024, Novo Nordisk has gained 29% and Eli Lilly 30%, as of Wednesday's close. The wider Healthcare Select Sector SPDR (XLV) it is 7% higher during the same period.
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