Virologist Michael Taylor does volunteer work helping cancer patients. His task: picking medical stocks.<\/p>\n
\u201cI <\/strong>have never known much good done by those who affected to trade for the public good,\u201d Adam Smith said. Maybe he\u2019d have made an exception for the Simplify Health Care exchange-traded fund. All of its 0.5% fee revenue, after overhead, is donated to the Susan G. Komen Breast Cancer Foundation. The fund\u2019s portfolio manager, Michael F. Taylor, takes no salary.<\/p>\n Private businesses that give away all profits and also succeed as businesses are scarce; the Newman\u2019s Own food branding operation, which has donated $600 million to children\u2019s causes, is unusual. An eleemosynary aim would seem to be even more out of place on Wall Street, where \u201cgreed is good\u201d is the mantra.<\/p>\n Jamel Toppin for Forbes<\/p>\n \u201cThis is the first true impact-investment ETF,\u201d brags Taylor, 52, who retired young and prosperous from a hedge fund career. \u201cI have the luxury of not having to receive money for my efforts.\u201d So far the fund has sent $250,000 to Komen. He picked Komen, he says, because it can effectively invest money in medical research\u2014some $10 million a year, recently.<\/p>\n Customers of the Simplify fund aren\u2019t making any sacrifices. The actively managed ETF, which opened in late 2021 and has attracted $144 million in assets, has averaged a 5.3% annual return since inception, per YCharts, matching the return of the giant Health Care Select SPDR fund, which passively tracks an index.<\/p>\n Taylor is assuredly not running any closet index fund. His annual turnover is 210%, par for a hedgie but freakish for an ETF. The SPDR fund owns Merck, Biogen, Amgen and Pfizer. Taylor shuns all four because, he says, looming patent expirations will decimate their profits. Pfizer commits the additional sin of making Covid vaccines, which the iconoclastic Taylor views as no good.<\/p>\n No one can accuse this guy of being shy about his opinions. At the beginning of the pandemic five years ago he was saying, loudly and impolitically, that the virus was a man-made Chinese concoction. Now he splutters about Moderna. Its mRNA vaccine can cause havoc with the immune system, he says, and might have to be withdrawn from the market. He may be wrong about that, but he has been right to avoid the stock, which is in the SPDR index fund. It\u2019s down from a high of $484 to a recent $35.<\/p>\n Taylor is entitled to an opinion about viruses. After getting a master of science degree from Johns Hopkins he went to work for GenVec, a company trying to use viruses to deliver genes into the body. He was dismayed to discover that an awful lot of the job involved moving beakers from one table to another.<\/p>\n \u201cI love the science. I just don\u2019t like doing it,\u201d he says. \u201cI might as well have been a carpenter.\u201d<\/p>\n Something else bothered him. This was during one of Wall Street\u2019s manias for biotechnology, and GenVec\u2019s stock was being touted on television. He had a dim view of the company\u2019s prospects and wished he could bet against it.<\/p>\n Solution: business school. After getting an MBA from the University of Rochester he went to work for a succession of money managers: Oppenheimer, Caxton, Citadel, Millennium. He relates that one of his successes was getting into Gilead, now a big company, when it was in the early stages of making drugs for HIV. Another was shorting Valeant, the high-flyer with factitious revenue growth.<\/p>\n Patrick Welsh for forbes<\/p>\n How To Play It<\/strong> The Simplify ETF owns shares in some big companies familiar to health care investors, like Eli Lilly. Lilly looks expensive at 70 times trailing earnings but is going to enjoy a burst of revenue, Taylor predicts, given the recent decision by Medicare to cover its expensive weight-loss drug for patients who have sleep apnea. Overweight, sleep-deprived elderly patients also need an air pump, made by Resmed. Taylor holds that stock as well.<\/p>\n Outside the mainstream medical companies, the Taylor portfolio can best be described as quirky. He owns Chewy. Most of its customers think of it as a dog food company. Taylor sees the payoff elsewhere, in the distribution of high-markup veterinary medicines.<\/p>\n PureCycle Technologies is a money-losing firm working on a way to recycle polypropylene. What\u2019s it doing in the health care fund? Taylor was looking for beaten-up stocks that might rebound and put \u201cgarbage stocks\u201d into a search bar. Google served up a collection of waste management companies, including this one.<\/p>\n Intrigued, he dug into the chemistry and concluded that PureCycle is on the cusp of commercialization that will yield billions in revenue. Simplify\u2019s rules allow up to 20% of assets to fall outside health care, and, when shares were tra\u00adding below $4, off from a $32 high, the fund star\u00adted buying. PureCycle recently closed above $7.<\/p>\n Arcutis Biotherapeutics is another long-shot bet with a potentially big payoff. This money loser is developing biotech treatments for autoimmune disease. The SPDR health fund owns none of it; Taylor\u2019s fund has 8% of assets in the company.<\/p>\n Immunology is as big a deal as virology. Future treatments for cancer and diseases such as psoriasis and multiple sclerosis will involve manipulations of the immune system. Taylor has a personal stake in immunology research. He suffers from an autoimmune disease that left him with crippling spinal pain until a recent experimental treatment involving lasers. The treatment worked. He\u2019s walking around now, after years of spending most days lying on his back.<\/p>\n Investors blow hot and cold on developmental-stage companies like GenVec, PureCycle and Arcutis. In the past few years, they have been rather cool. Since Simplify Health Care opened, health care in general and biotech stocks in particular have underperformed the market.<\/p>\n This optimistic risk taker is convinced that the market will turn in his favor. \u201cWe\u2019re in a golden age of discovery and development in biotechnology, and only at the very beginning,\u201d he says. \u201cHumans are going to be living longer and better lives.\u201d Let\u2019s hope he\u2019s right.<\/p>\n Editor\u2019s note: Market-related data points are as of March 12.<\/p>\n \nMore From Forbes<\/strong>ForbesThe Market Is Crashing. Buy These Stock Index FundsBy William Baldwin<\/a>ForbesIt\u2019s Time To Buy Foreign Stocks\u2014Here\u2019s How And WhereBy William Baldwin<\/a>ForbesThe Best Ways To Profit From, And Safeguard Against, Market VolatilityBy Hank Tucker<\/a>ForbesHow To Boost Your Cash Yield At Fidelity, Vanguard, Chase And SchwabBy William Baldwin<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Virologist Michael Taylor does volunteer work helping cancer patients. His task: picking medical stocks. \u201cI have never known…\n","protected":false},"author":2,"featured_media":45694,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4316],"tags":[25198,1378,25197,105,4348,25199,25200,25201,25196,25202,16,15],"class_list":{"0":"post-45693","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-healthcare","8":"tag-arcutis","9":"tag-breast-cancer","10":"tag-fidelity-health-care","11":"tag-health","12":"tag-healthcare","13":"tag-purecycle","14":"tag-simplify-asset","15":"tag-simplify-etf","16":"tag-spdr-health-care","17":"tag-susan-g-komen-breast-cancer-foundation","18":"tag-uk","19":"tag-united-kingdom"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/114391096640771029","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/45693","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=45693"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/45693\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/45694"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=45693"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=45693"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=45693"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\nBy William Baldwin
\nBuying sector funds to beat the averages is a fool\u2019s errand, but there is something to be said for them as a way to offset lopsided exposures in your spending patterns. Thus, oldsters confron\u00adting outlandish drug costs and the insolvent Medicare program might want to get shares of a medical fund. One choice is the idiosyncratic ETF described in the adjoining story.
\nA blander alternative would be an index fund: Health Care Select SPDR,<\/strong> Vanguard Health Care<\/strong> or Fidelity MSCI Health Care.<\/strong> They have assets between $2 billion and $39 billion, expenses below 0.1% and nearly identical top holdings weighted to the biggest players.
\nWilliam Baldwin is Forbes\u2019 Investment Strategies columnist. Illustration by Patrick Welsh for Forbes.<\/p>\n