The Reverse-Waldo Effect

Navigating Public Market Investing

Author

Sanjana Vig
August 16, 2023

Everyone’s heard of or played ‘Where’s Waldo’. Finding that red and white striped shirt amongst the chaos was super satisfying as a kid. Now as adults, in the context of investing in public markets, we’re experiencing the opposite. Different funds contain many of the same companies. Rather than looking for Waldo, he’s everywhere (Reverse-Waldo Effect).

This is just one illustration of how public market investing has changed.

Here are some more thoughts on the subject.

“…using AI to select for companies in an ETF is like giving a participation trophy to a kid who just showed up for practice.”

Dhruv K. Vig Ph.D (Co-founder and CEO of Langar)
Public Market Update: Average Sector Performance

Here’s a quick look at how HealthTech is doing so far this year.

Each sector is going strong, with Clinical Trials still lagging.

Access to Care, Treatment Device and Biopharma have gone up even more compared to the first half of 2023 (as of June ‘23: 24.67%, 12.04% and 3.54% respectively). What’s happened recently to explain these gains?

For starters, consider AI 🤖.

The public markets are also exploding in other sectors because companies are adopting AI, already have it, or have plans to execute AI functions.

For Biopharma companies, for example, AI can improve the efficiency of back end data analysis for drug development.

For Treatment Device and Access to Care companies, staying ahead of the curve means adopting AI. AI can have a significant impact by:

⏩️ Automating gathering patient info to reduce time wasted

💁 Reducing the need for human workers performing administrative tasks

👩‍⚕️ Save a physician’s time on administrative tasks 

Learn more about each sector by clicking here:

Articles Worth Reading

There has been a rise in ETF investments globally, with a 50x increase in assets under management (AUM) in the last 20 years ($204B in 2003; $9.6T in 2023). With this rise also comes more unique ETF options outside of Index and Total Market Funds, including:

  • Thematic ETFs

  • AI-driven ETFs

  • Speculative ETFs

  • Activist ETFs

While each sounds uniquely enticing and may make you think you’re diversifying your portfolio, the reality is that many of these funds contain significant overlap. You don’t have to go far to see this. Take two popular Index funds, QQQ and SPY:

44% overlap creates significant redundancy in your portfolio. In other words, you’re experiencing the 🧍‍♂️ Reverse-Waldo Effect.

This, combined with companies going public by bypassing the normal IPO process, has created a public market circus. It can be difficult to ascertain what you’re investing in, and if the investment is worth it.

To combat the mayhem there are some key steps all investors can take:

📄 Read the Fund Prospectus before investing to understand the nuances

💹 Find actively-managed funds with an anti-correlated thesis

For the full article about public market investing, click below:

Opinion

A Doctor’s Perspective

To be completely frank, when it comes to doctors and investing, I’ve always said that doctors are the dumbest smart people out there. We know our stuff, but regarding public markets and investing, we know very little (generally speaking).

Unfortunately, the lack of knowledge combined with high income leads many physicians to take a hands off approach to investing by hiring financial advisors, or remaining extremely conservative in their investment choices (again, speaking broadly).

A major downside of this divide between physicians and investing, I believe, is that the market suffers. If doctors were to invest in a product, it’s likely because they believe in it, use it, see its value and care enough to support it. However, only a fraction of physicians who actively invest are looking for or targeting healthcare for their portfolios. I’ll admit that I’m one of those that don’t have a healthcare fund in mine (yet).

My personal reason is that many healthcare funds contain companies I’d prefer to avoid for moral reasons, even though they’d probably make me a lot of money.

If physicians find it difficult to get behind healthcare investing, how are non-healthcare retail investors supposed to get behind it? On the other hand, how does a retail investor know the truth behind a healthcare company’s operations?

Healthcare is a large bandwagon, and a lucrative one, but we need physicians and healthcare professionals to lead the way and educate the public on what’s worth the investment. Just like we rely on finance professionals to tell us best banks and brokers to use.

Healthcare expertise contains value far beyond the halls of a hospital. Perhaps, this is one way healthcare professionals can influence our problem-ridden, overly expensive and wasteful industry.

—Sanjana Vig MD,MBA (Anesthesiologist, Peri-operative Expert)