Investing
Introducing the Obesity ETF: Fighting Obesity, Dominated by Novo Nordisk and Fresenius
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Perhaps you have heard that there is an exchange traded fund (ETF) for just about any sector and just about any theme. Now you can add the war against obesity to the list. Janus Capital Group Inc. (NYSE: JNS) has now launched the Obesity ETF (NASDAQ: SLIM).
Some news releases almost seem better than fiction, and an ETF targeting obesity almost certainly fits into that. The Obesity ETF has a strategy of investing in companies that provide treatment and care for obesity and obesity‐related disease. This ETF includes biotech and pharmaceutical stocks, as well as health care and medical device companies. Also included inside the ETF are other health care firms, along with weight loss market and supplement companies.
This ETF is heavily dominated by Novo Nordisk A/S (NYSE: NVO) and Fresenius Medical Care A.G. & Co. KGaA (NYSE: FMS). When you add up Novo Nordisk and Fresenius Medical’s weighting, these two foreign-based stocks with American depositary shares make up roughly 39% of the entire ETF.
What is interesting here is that the ETF also includes very speculative companies that have questionable futures. MannKind Corp. (NASDAQ: MNKD) is one such speculative company that comes to mind here for its inhalable insulin. Even Herbalife Ltd. (NYSE: HLF), the embattled supplements company targeted by Bill Ackman’s Pershing Square, is a part of this ETF. Herbalife has the fourth highest weighting at 4.59%, which is over six times MannKind’s 0.7% weighting in the ETF.
None of the other stocks inside the ETF’s index have even a 5% weighting, and the top 10 holdings account for 72.77% of the entire ETF weighting. The Obesity ETF has a total of 42 holdings, so the bottom 32 holdings account for a total weighting of just over 27%. Keep in mind that these weightings and index components can change drastically through time. Some may drop off the index, and others may be added in the future.
Another thing to consider here is that 20 of the stock holdings do not even have a 1% weighting. This means that the top two holdings (Novo Nordisk and Fresenius Medial) each are weighted more than the bottom 20 components combined.
As far as why Janus wanted to include this thematic launch, it noted that more than 640 million people globally are classified as obese. That figure has risen a whopping 600% over the past 40 years. On a global scale, it counts over 10% of men and 14% of women now classified as obese. Also, those numbers are projected to rise to 18% of men and 21% of women by 2025.
Janus also went on to show that the United States alone has 75% of men and 67% of women aged 25 and older who are now classified as either overweight or obese. Their global tally is now also said to be $2 trillion per year to treat obesity and related treatment costs in health care and lost productivity. Janus indicated that the low‐calorie food market in the United States is projected to be worth $10.4 billion by 2019.
The Obesity ETF aims to track the performance of the Solactive Obesity Index. Also, it comes with a net annual fee of 0.50%.
Targeted companies aim to track obesity treatments by targeting obesity and obesity-related disease. This includes diabetes, high blood pressure, cholesterol, heart disease, stroke and sleep apnea. The ETF also includes companies that focus on weight loss programs and supplements, as well as plus-sized apparel.
24/7 Wall St. has included the ranking of each holding, as well as the percentage weighting, as of June 8, 2016, as follows:
- Novo Nordisk A/S 19.59%
- Fresenius Medical Care AG & Co KGaA (ADR) 19.24%
- DexCom Inc 4.92%
- Herbalife Ltd 4.59%
- ResMed Inc (CDI) 4.56%
- DaVita HealthCare Partners Inc 4.49%
- St Jude Medical Inc 4.42%
- Fisher & Paykel Healthcare Corp Ltd 4.04%
- Insulet Corp 3.67%
- Nipro Corp 3.25%
- NxStage Medical Inc 2.34%
- Cato Corp 1.95%
- Endologix Inc 1.79%
- Spectranetics Corp 1.60 %
- Nutrisystem Inc 1.44%
- Vascular Solutions Inc 1.41%
- N Brown Group PLC 1.40%
- USANA Health Sciences Inc 1.27%
- Lexicon Pharmaceuticals Inc 1.24%
- Ypsomed Holding AG 1.15%
- Cardiovascular Systems Inc 1.13%
- Arena Pharmaceuticals Inc 1.08%
- Weight Watchers International Inc 0.97%
- Keryx Biopharmaceuticals Inc 0.88%
- Rockwell Medical Inc 0.86%
- MannKind Corp 0.70%
- CryoLife Inc 0.69%
- AngioDynamics Inc 0.68%
- Lifetech Scientific Corp 0.64%
- Medifast Inc 0.59%
- Esperion Therapeutics Inc 0.58%
- Microport Scientific Corp 0.52%
- LeMaitre Vascular Inc 0.36%
- Adocia 0.33%
- Zafgen Inc 0.32%
- Destination XL Group Inc 0.32%
- VIVUS Inc 0.24%
- Tandem Diabetes Care Inc 0.23%
- Oramed Pharmaceuticals Inc 0.17%
- SomnoMed Ltd 0.15%
- Aegerion Pharmaceuticals Inc 0.10%
- REVA Medical Inc 0.10%
Nick Cherney, Senior Vice President and Head of Exchange Traded Products for Janus Capital Group, said:
Changes in demographics and lifestyle are altering the investment landscape. These thematic Exchange Traded Funds are designed to capitalize on those shifts to give advisors new tools that can help clients achieve better financial outcomes.
Having an ETF that has such dominant weightings can greatly skew or influence returns through time. Having such speculative companies as Herbalife and MannKind also show how much speculation there can be, even inside of an ETF aimed at diversifying risks in a targeted theme.
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