Market Risk is Up-Speculation Is Off-Look for Value

The news out of ASCO was not that new and exciting but it is even harder to find anything positive to write about three weeks later. Investors are “hiding out”.

The overall market has cooled down from the recent rally and macro news has not been good: jobs, real estate and other economic indicators are all down. Bonds are taking money from equities  as the FED keeps ultra-low interest rates at 0-0.25%. The 10 Year Treasury Bond is near its high of  3.07% yield. The ETF’s IBB and XBI are basically flat YTD while the NYSE Arca Biotech Index FBT is up about 12% YTD. Mid-Cap biotechs have been volatile with a few winners and losers driven by clinical milestones.Within the Rayno Life Science Portfolio the following stocks have good YTD traction: Alexion (ALXN) at $53.37, Illumina (ILMN) at $44.14 ,Ardea (RDEA) at $21.71 and Seattle Genetics (SGEN) at $12.77. New buys in tools are Celera (CRA) at 7 and Quidel (QDEL) at $12.30.

With few stock drivers out there the best strategy for now would be to look for yield with large cap pharma stocks that are beaten down: Bristol(BMY) at $25.4, GlaxoSmithKline (GSK) at $35, and  JNJ at $59. Large Cap Biotechs such as Gilead (GILD) and Celgene (CELG) are also near low historical values based upon earnings. MedTech blue chip Becton Dickinson is near 2010 lows at 69 with a 2% yield. However as we wrote earlier this month large cap healthcare stocks are sensitive to the Euro.

Pfizer is down 3% today at $14.44 as the FDA asked the drugmaker to put their osteoarthritis (tanezumab,anti-NGF) drug on clinical hold.Leerink Swann  analyst Seamus Fernandez has an outperform on PFE but said this failure removes another upside pipeline opportunity. Based upon current cash flows, Fernandez has an $18-19 target on the stock.

%d bloggers like this: