Update-1 Strong bounce-back with NAZ up 2.55% and XBI up 4.36% to $159.54
- XBI rally mirrors IWM up 2.62%.
- Technology running strong with QQQ up 2.72%.
- Second their COVID Vaccine plays up again:INO, NVAX: MRNA downgrade by BofA.
- Bipartisan stim talks ongoing.
Healthcare Portfolio Update -January 2021
- COVID vaccine roll-out critical to economy.
- Momentum investing decouples stocks from fundamentals.
- Will healthcare sector outperform during a sell-off?
After a signifiant sell-off on Friday 1/29 we need to be focused on healthcare and biopharma stocks which show individual weakness particularly United Health.(UNH) and large cap biopharmas like GSK, MRK, and RHHBY. But the overall trend in biotech stocks remains strong bolstered by COVID vaccines and diagnostics. Our top new buy/adds in 2021 have been two diagnostics stocks ABT and HOLX both we have covered in past posts. The life science tools and diagnostics sector has been strong over the past six months and if you held large cap Illuimina (ILMN) and ThermoFisher (TMO) over the long term since we first covered them in 2016 you would have easily beat the market. Indeed the trend we picked up early and re-iterated at the 2019 AACC Meeting was Molecular Diagnostics and Sequencing including PacBio (PACB) in 2020 which became a momentum stock . Pacific Bio (PACB) sold off on Friday so we have to wait for a new entry point. Two other big wins from 2016 were QDEL and NSTG along with a few other companies that were acquired.
Focus on trading COVID vaccine stocks primarily BNTX and MRNA. Use options. We regret not holding them long term from earlier last May in our coronavirus portfolio. Added BNTX last week and missed the rocket 65% move in Novavax (NVAX) to the $220 handle on their UK efficacy data and pathway to US approval.
MOMENTUM Trading vs LONG Term Investing
We have written about momentum trading in the past and this is a good week to remind you about volatility. How can you hold on to a long term winner like Illumina (ILMN) with all the monthly vol? You see the froth of the past week and your portfolio discipline gets derailed . You are making money on trades but if it is short term taxable and the big money comes from long term gains.
With all the FROTHY moves over the past week the upcoming week of earnings offers a good test of market strength, Raise a little cash.
Healthcare Portfolio Review
We have emphasized over the past few years to weight your Portfolio with XBI if you want beta or feel bullish and even over the past week among ETFs it outperformed. The XBI is equal weighted with biotechs including many small and mid caps and is up over 6% in January. The IBB did well up over 5% for the month despite having almost 50% in well known large caps: AMGN, GILD VRTX ILMN REGN and of course MRNA. Why try to to pick large caps when the IBB and the XBI do a better job? We’ll see in times of high volatility. Maybe you owned Lilly (LLY) up 24,5% in one month boosted by earnings and a potential breakthrough antibody treatment.
Watch for weakness in the small caps (IWM) as that could diminish speculative appetite for biotechs.
February can be a weak month and the recent big momentum plays raises concerns, Can life science stocks remain leaders during a major set-off?
Or does the market move to the next hot sector ? Barron’s says watch for a commodities run.
|Stock/ETF||Ticker||Price||Wgt||P 11/13||P 11/27||%Perf||Price||QTR||2020 Yr||Price||%Perf|
|10/25||%||1 mo.||12/31||%||% Perf||1/29/21||1 mo.|
|iShares NAZ Bio||IBB||136||25||141.06||143.22||2.27||151.5||11.9||25.7||160.64||5.35|
|iShares Russell 2k||IWM||163||10||173.51||184.37||16.56||196.4||30.9||18.3||205.56||4.66|
|SPDR S&P Bio||XBI||117||5||125.04||131.46||11.95||140.8||26.3||48||152.88||6.11|