Got Gold and U.S. Treasuries?

It is impossible to really describe the market turmoil in the space below so let this post from Investor Uprising suffice. With 10 Year treasuries under 2% and Gold approaching $1900 fear is pervasive. Bankers meet in Jackson Hole next week and we will hear more about the European debt crisis as well so expect more volatilty in the markets. We have heard so much about the upcoming recession so that if somebody finally announces it that may be the time to buy equities. In the meantime let’s hope that Obama really is working on a jobs plan during his 10 day vacation.

Drug Stocks Firming Up: Abbott (ABT), Amgen (AMGN) and Biogen (BIIB)

We are holding the S&P 500 2011 bottom for now but this nasty month has two weeks of trading left. Since July 20 the Biotech ETF IBB is down 18% compared to the NASDAQ-100 ETF QQQ down 15%. However this week the the QQQ was down 6.61% compared to 2.48% for the IBB. Tech and internet stocks took a bigger hit than large cap biotech stocks in the NASDAQ-100. Over the next two weeks look for a bottoming trend in large cap biotech stocks. Here are the assumptions for Q4 portfolio positioning in “blue chip” quality biotech stocks:

  • The recovery in biopharma stocks is encouraging from last week’s moves and the bull market is intact. Both the IBB and XBI are about 10%  higher than August 2010 lows.
  • Large  and mid-cap biopharmaceutical stocks that can be bought on technical and fundamental  considerations are Alexion (ALXN), Amgen (AMGN), Biogen (BIIB), Cubist (CBST), Gilead (GILD), and Regeneron (REGN).
  • Large cap drug stocks that pay a 3-4% dividend also were in a recovery mode last week so we expect stocks like Abbbott (ABT), Bristol Myers(BMY) and Pfizer(PFE) to outperform the market.

Small and mid-cap biopharmaceutical stocks were very active but mixed in trading Friday, still they outperformed the general market. Look for long term technical support and new product growth in Biomarin(BMRN) and Seattle Genetics(SGEN). The Rayno Mid Cap Biopharma Index was flat on Friday as were all major biotech ETF’s. The diagnostics and tools sector continues to get crushed and most were off 10% from Wednesday’s highs: GPRO ILMN LMNX and TMO. The main driver for these stocks in H1 was M&A.It is too early to call new buys in tools and diagnostics or even call some value trades. We provided some comparative financial data last Monday.

Financial metrics don’t seem to matter in this market. Selling begets selling. Buyers are keeping their cash lairs fat. Funds are raising  cash for better times.Technicals do matter and the high speed robo-traders are whipsawing  traders. For  those who still believe in equities, overweight  the beaten down healthcare sector.

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