Introducing the Obesity ETF: Fighting Obesity, Dominated by Novo Nordisk and Fresenius

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%.

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