Update-4 January 2 , 2020. 12:11 EST….. Biotechs and Healthcare lagging a bit in the New Year. Watch rotation into other sectors -tech, financial, energy; update at end of week. Many mid and small caps are weak despite NAZ up 0.66%. Russell 2000 is down 0.79%.
Update-3 12/30/19…Momentum easing in biotech and QQQ on holiday end of year trading.
- XBI at December support level $95.16.Failed to reach $100 resistance.Up 30.54% for 2019.
- IBB also at December Support level of $120.51 Up 23.60 % for 2019*.
- QQQ at $212.61 near highs for the year of $214; Up 37.27% for 2019*. Best sector for 2019 was tech (XLK) up 47%
- XLV at $101-102 level highs for 2019.Up 30% for 2019.
Update-2 12/24….Slow holiday trading with a bullish tilt.Metals were gainers with gold closing above $1500.
- Large cap biopharmas were mixed but laggards were in the green: BIIB,REGN.IBB up 0.47%.
- XBI was up 0.77% with mid-cap movers: ANAB,IMMU,BHVN.
- Gene therapy winners: SLDB BLUE QURE NTLA ALLO.
- Small cap big winners:MRNS EPZM KRYS
Healthcare IPOs did well this year with 68 and a return of 35.9% .See www.renaissancecapital.com. Proceeds were $9.2B.
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Update-1 We will update key life science sectors tomorrow after the close. But here is an article we wrote in February 2014 when biotech stocks got frothy. But the top of the IBB did not occur until July 2015 and we are now only approaching that top 5 years later. We now have a double top on the IBB at the $123 level.So we are not in a biotech bubble yet but we need a solid breakout fro IBB at $123 to confirm the recent tend for $100.
Biotech Stocks Make a Huge Q4 Comeback in 2019
Our Portfolio Calls Were Excellent.
Healthcare remains an Overweighted Sector for 2020
The biotech sector was virtually flat on 10/3/ 2019 and took off from there to give 30% gains in the XBI. The rally starts with healthcare stocks sparked by earnings and a realization that easy money from the FED would continue in the near term. Macro issues waned in importance as well and the seasonal rally was on helped by new product approvals from the FDA.
Our calls for biotech and healthcare stocks were good in 2019 and we expect the current momentum will carry us through January 2020. Here is a brief review of our major pivot points;
Early in January 2019 we attended the J.P. Morgan Healthcare Conference and selected three picks from the Conference. We subsequently provided updates on these companies. Here is the stock performance YTD but all were easy trades for profits after mid January.
Amarin (AMRN) up 61.34% YTD. GenMark (GNMK) down 6.64% YTD, TeleDoc (TDOC) up 69% YTD.
We provided many other trading ideas in 2019 favoring gene therapy and mid-cap biopharma stocks.
From mid-year on we called for a strategy for a large cap biopharmaceutical portfolio with a core position in five dividend paying stocks: Abbvie (ABBV), Bristol-Myers (BMY) including Celgene, Gilead Scnces (GILD), Merck (MRK) and Roche Holdings (RHHBY), We felt these picks would outperform the large cap weighted ETF IBB that is up 25% YTD. With the exception of GILD all of them did well even though we missed AMGN and VRTX.
For trading and a core overweight position in biopharma we recommended the XBI up 32.7% YTD .
In mid-October we suggested investors re-balance portfolios with healthcare stocks based on Q3 earnings from several companies. This report allayed fears about macros forces that dominated market sentiment from macro issues like the tradewar with China and drug pricing reform.We followed up this post with tracking of the healthcare overweight call with a sector review including biopharma, medtech and services.Here are some ETFs and funds that track these stocks:
- Fidelity Select Medical Technology Fund (FSMEX) up 30% YTD.
- T.Rowe Price Health Sciences Fund (PRHSX) up 29.27%.
- iShares Med Device (IHI) up 36.74%,
- Healthcare SPDR (XLV) up 25.5%
This bullish trend should continue through January 2020 at which time Q4 earnings and guidance are released. It may be more difficult to find new core positions but the tape is strong and trading opportunities abound.The Q4 chart for 2019 is the reversal of Q4 2018.
Track the QQQ up 36% YTD for market tends through January 2020.