Update-1 10/28… Broad rally after Megacaps sell-off -AMZN, META and MSFT. it almost look like the BIG tech money got spread around to energy, financials, and healthcare. In the meantime the DOW is up 5.69% for the week and 10.73% for the month led by AAPL soaring today.Biotech innovation is becoming more appreciated as even speculative small caps have momentum.
Now that a sector shift is underway let’s see where the money flows next. Only issue is many investors are crowding into healthcare.
- Healthcare sector continues strong per our notes all year, XVV UP 5% for the week.
- Gilead Sciences (GILD) up over 12% to $79 on earnings and upgrades.
- New buys this week HOLX at 65, IBB at 126, ILMN at 206. Added to MRNA and PACB.
- IWM and IJR small cap plays are up 6.06%and 5.32 % respectively.
Healthcare Stocks Outperform in the Bear Market
- Check your portfolio for sector weighting as you need to be overweight healthcare and energy because of rising rates and the WAR in Ukraine.
- XLV is lagging because of holdings in MedTech and Diagnostics. The IHI is down 22% YTD.
- A huge earnings week is coming up for MEGAcaps and large cap Biopharmaceuticals.
It was a good week for investors as all major averages rallied with no dire earnings results. And this week the Megacaps as well as our favorite stock group large cap biopharmaceuticals report earnings. After a volatile September the biopharma group looks back on track with most of our top picks are up double digits YTD. Performance leaders are LLY, MRK and VRTX. Biopharma stocks have avoided the volatility of the FED and rising rates because they have low PEs in the mid teens and pay dividends. Hopefully the longer term impact on earnings with drug pricing legislation will be minimized. One of our top picks United Health (UNH) is up 6.29% YTD outperforming the DOW down 14.4% YTD.
Here was our last Large Cap Biopharma review in August.
Biotech stocks as represented by the IBB have lagged down 20.78% because of the weighting of mid and small caps which are more sensitive to interest rates and access to capital. But over the the past 30 days the IBB is positive and a Q4 NASDAQ rally should help biotech. Another example of lagging small caps is the IWM down 22.36% YTD and the more speculative XBI down 29.58% YTD off recent October highs of $83.11.
Without large cap biopharmas and UNH your portfolio would have underperformed as the ETFs like XLV have not captured the gains in the healthcare sector. The XLV is down 10.19% YTD.
Much of the bear market mentality has been generated by MACRO analysts who ignore sentiment and sector analysis. Their models aggregate market PEs with higher rates and forecast reduced earnings. From this they conclude PE compression and a continuing bear market for 2023.
For now and through Q3 earnings and the election, trade the bear market rally..
Long all top biopharmas and UNH, PRHSX ,FBIOX and XBI.
|Stock/ETF||Ticker||Price||Wgt||Price||Price||1 year||YTD||30d||P 10/22|
|10/25||%||12/31||% Perf||12/31/21||% Perf||%Perf||
|iShares NAZ Bio||IBB*||136||15||151.5||25.7||152.62||-23.91||-20.78||2.54||120.9|
|iShares Russell 2k||IWM||163||5||196.4||18.3||222.45||-24.24||-22.36||-1.51||172.7|
|SPDR S&P Bio||XBI||117||10||140.8||48||111.96||-36.34||-29.58||-0.37||78.84|
|T.Rowe Hlth Sci||PRHSX||n/a||5||99.65||n/a||104||-23.47||-17.39||0.79||95.98|
|iShares U.S MedT||IHI||50||5||54.83||65.85||-25.91||-27||-2.16||48.02|
|Bristol Myers Sq||BMY||24.91||15.81||3.96||72.21|