We took profits on many longs and shorts in the coronavirus sector so I will need to look at new trades for Q4. Our small longs for now are ABT, AZT, GNMK, GILD, MRNA, MRK, OSUR and TDOC. However We are also long many large caps in addition to above: ABBV, BMY, JNJ, RHHBY. XBI has dropped a tad below $108 so we would be looking to add a long position going forward close to the $100 handle.
Update-4 10a EDT August 27 Abbot 15 Minute Antigen Test Upends COVID Diagnostic Stocks-Emergency FDA approval for Portable Test with No Instrumentation
- Abbott’s BinaxNOW COVID-19 Ag Card is a rapid, reliable , highly portable tool.
- Sensitivity is 97.1% and specificity of 98.5% using proven lateral flow technology.
- ABT stock up 7.5% to $111+
- Big coronavirus DX losers on Abbott news: FLDM OSUR QDEL etc.
Update- 3 11:30 a EDT Cautious but trading short term news:
- New trades: Moderna (MRNA) long at $69 expected more data in coming weeks; today announced promise from Ab levels in older adults.
- Added Orasure (OSUR) at $15 handle expecting new products in Q4 for rapid coronavirus tests.
- Hot stock of the day: Fluidigm (FDLM) up 33% saliva collection device emergency approval approval for COVID 19 PCR RT.
Update-2 2P EDT Sell-Off Picks up with Coronavirus trades-bearish pattern
We have been bearish short term per previous posts on excessive speculation, seasonality, and geopolitical issues. Today selling has picked up as technicals weakened and no trends or solutions have emerged for the pandemic.Data from major vaccine trials is expected in October with apparent leaders AZN, JNJ, PFE and “pure-plays” BNX and MRNA. Profit taking is the MO today. Coronavirus testing is in apparent disarray with big concern about timely results reporting and complexity of PCR tests. Coming soon: antigen tests and rapid tests such with sample collection for saliva?
- Big losers: BNTX down 3%, CODX down 16%,CVAC down 7%, GNMK don 5.9%, INO down 14.&5,QDEL down over 6%, NVAX down 13%, TDOC down 4.6%, VIR down 16%.
- XBI down 2% but holding $109 July lows.
- Mid-cap bios weak but IBB down only 1%.
- Trump pressures FDA for approval of Blood Plasma Covid Treatment. Shares of obscure small companies boosted. Little efficacy data.
- AZN rumors on its vaccine boosts stock –US Emergency use authorization ?
Update-1 8/19 Late-day trading 2:30p Mixed market in biopharma with big losses for CVAC BMRN.
- Surprise: Biomarin (BMRN) down 35% after FDA requests more data on Hemophilia A gene therapy drug to $76 handle.Little concern now for other gene therapy stocks. Our FOCUS pick CRISPR (CRSP) is up 6% to $101 level.
- High flying RNA vaccine player CureVac (CVAC) plummets 15% after blockbuster Aug 14 IPO at $16 raising $213M. Their COVID-19 vaccine is in Phase 1 and CureVac also focused in rabies and RSV.
- Coronavirus losers today are BNTX CODX GNMK QDEL. The IBB and XBI were flattish.
- Momenta Pharma (MNTA) up 69% on $6.5B buyout from JNJ.
Tough Time to Trade Biotech-But Build a Portfolio for Q4
- Momentum is fading-XBI is a bellwether.
- Coronavirus pure plays are overdone especially vaccines.
- Sector shift trading away from biotech?
In previous articles we cautioned on new biotech positions because of Strong Headwinds primarily seasonality, speculative excess and geopolitical uncertainty. Until a new stimulus package emerges and coronavirus transmissions get under control stocks will remain volatile despite raging bullish sentiment. Moreover more of the trading action has shifted to tech, semiconductors, precious metals and cyclical stocks as the biotech momentum has ebbed. Here are some strategies to consider for your life science portfolio.
Compare these two charts of biotech (XBI) and technology (XLK):
- Core Holdings- Growth plus Dividends with Large Cap Biopharma.
We have emphasized this group of stocks over the past 18 months and currently hold many of them: ABBV, AZN, BMY, GILD, GSK MRK and RHHBY. All of them pay decent dividends with treasuries paying under 1%. They are not without risk because of drug pricing rhetoric and potential legislation. A basket of them should lessen risk. An alternative is the IBB with has little yield but is up over 12% YTD.Some of these stocks also offer a Coronavirus Vaccine play: AZN GILD GSK MRK. Another option is the Fidelity Biotechnology Portfolio Fund (FBIOX) up 13.36% YTD at $23.70 focused on large and mid-caps.
2. Emerging Growth– Recent Picks that are Still Long Term Holds (or trades)
We own or have traded these biotech stocks and will add to them for the long term. Key themes are molecular diagnostics, sequencing and gene therapy, There are many new funds and ETFs that hold emerging technology and ‘innovation” stocks focused in gaming, genomics, gaming and online retail. Among them are sector ETFs such as the ARK family: ARKG, ARKK and ARKF that hold many momentum stocks.
Here are several FOCUS stocks to trade or own for the long term. We will update this list as needed.
- CRSPR Therapeutics (CRSP) gene based medicines with a broad pipeline in immuno-oncology and hemoglobinopathies.
- Editas Medicine (EDIT) gene therapy covered from JPMorgan 2020 Conference.
- Genmark (GNMK) infectious disease diagnostics including coronavirus.
- Hologic (HOLX) women health and infectious disease diagnostics.
- Illumina (ILMN) leading player in gene sequencing.
- Teledoc (TDOC) telemedicine play recently merged with Livongo Health (LVGO. a 4X return since picked in 2018!
- Vir Biotechnology (VIR) recent IPO with focus on viral therapies for HBV,Flu and coronaviruses.
3. Trading Technicals and News when Fundamentals matter less. Winning trades in 2020.
This market works for biotech traders who have the tenacity to sit in front of their screen daily trading the volatility of hot stocks like FAANG and the IBD 50 list. In these pandemic times with financial guidance withdrawn on many stocks technicals are the rule! Here are the top biotech stocks in the IBD 50 (investors.com) in order: Perkin Elmer (PKI) , ThermoFisher (TMO), Vertex Pharma (VRTX), Abbvie (ABBV) and BristolMyers Squibb (BMY).
- Here are some of our best trades (mentioned in previous posts) that we still hold: AXDX up 50%, PACB up 71% in 2020.
- XBI on momentum or weakness. Current trading range is $109-115 with 2020 highs of $121.