Rayno Diagnostics and Tools Portfolio: ILMN, NEOG

Life Sciences: Biopharmaceutical Stocks are Hot, Tools and DX are Not

We recommended avoiding the Tools/Dx sector several weeks ago as they were lagging biopharmaceutical stocks due to earnings misses, concerns about NIH finding for R&D, and lack of exciting new products. Illumina (ILMN $28.95) is up 6.5% today and has been volatile in the $26-32 range. ILMN has formed a solid bottom and despite lack of earnings guidance it is time to accumulate stock.

Neogen (NEOG $30.26) down 5.73% announced Q2 2012 with an EPS shortfall of $0.22 vs $0.26 in the prior quarter. The stock remains a hold but no new buys.

Stocks that are holding up well YTD in our tracking portfolio: Abaxis (ABAX $28), Exact Sciences (EXAS $8.13),GenProbe (GPRO $57), and Quidel (QDEL $15.86).Laggards include Alere (ALR $23.04), Qiagen (QGEN $13.76) and Sequenom (SQNM $4.05).

The large cap Life Science Tools Companies have begun to move up from 2011 lows. These stocks are a good bellwether for sector recovery in 2012:

A leader YTD in veterinary health is Idexx Labs (IDXX $77.19) up 11.6% YTD and up 8.5% over 30 days.

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