Investing.com - Financial Markets Worldwide

A Coming Boom in Healthcare M&A

Published 01/10/2012, 02:05 AM
Updated 07/09/2023, 06:31 AM
2070
-1.75%
BIG
-0.47%
INHX
0.00%

Wouldn't it be nice to be able to know ahead of time which companies are going to be acquired? Of course it would. We would all love to have bought Inhibitex on Thursday or Friday, before Bristol-Myers announced it was buying the company for a premium of over 100%. Alas, that is not what happened. While it may be difficult to invest based on which companies will be acquired, ETF's can help. When a company gets acquired, its peers often rise in value alongside it.

Inhibitex may be rising 141% today, but Idenix is rising almost 40%, a very respectable rise. Given the growing demand among big pharma, and to some extent the Big 4 biotechs, to fill their pipelines, we are certain that m&a in the space will rise. The best way to play it, aside from buying up all the stocks of companies you think will be acquired, is through the First Trust NYSE Arca Biotechnology Index Fund and the PowerShares Dynamic Pharmaceuticals Portfolio. Both ETF's focus on drug companies.

The First Trust ETF has 20 holdings, including the Big 4 biotechs and 16 other companies with drugs in all stages of development and commercialization. The PowerShares ETF has all of the US big pharma players and many other small and mid-cap pharmaceutical companies. We think both ETF's offer investors an effective way to profit from the coming boom in healthcare m&a.

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