9/12/22...Bristol-Myers (BMY) up 5% on FDA approval of psoriasis drug.Large cap biopharmas rally: AZN, GILD, MRK, etc. Mid- caps green esp MDGL,MRTX.
- Morgan Stanley Healthcare conference was today could account for biotech strength.
- Biden Issues Executive Order on Advancing Biotechnology.
- Time to look at T.Rowe Price Health Sciences Fund (PRHSX). Already in our model portfolio.
9/9/22… Nice broad rally day with the NASDAQ up 2.14%.The Russel small cap(IWM) was strong up almost 2%. Tech stocks (XLK) came back up almost 2%.The rally today.caught many traders by surprise given the tough bearish rhetoric. Is it a pre-CPI rally expecting lower inflation data next week or just traders looking for bargains?
The IBB was up 1.12% and the XBI up 0.67% keeping the biotech momentum going. Large cap biopharmas were green with the following stocks near 52 week highs; LLY, REGN, VRTX . Momentum stocks and ETFs were up: ARKG, IONS,NTLA,RGEN,TDOC etc.
Moves among our small/mid cap pick list were: EVH, CRSP, CYRX, and QDEL.up 4% to 86.
9/8/22 2P EDT Biopharmaceutical movers up: ABBV up 1%, BIIB up 2.85%, REGN up 19%, VRTX up 1.5%. Even the IBB is up 2.85%
The more speculative XBI was also up 2.59% to the $86 handle.
Moderna(MRNA) recovered as their R&D show inspired confidence in their mRNA technology and product portfolio.
Regeneron clinical trials shows a “retooled’ Eyelea could help its competitive position.
Healthcare Sector Still Looks Good Despite Losses Over Past 30 Days
- Geopolitical Turmoil and FED Fears curb buyers with knee-jerk selling and sector rotation.
- Large cap Biopharma with dividends still offer good value.
- Small Cap Picks sell-off but expect a Q4 rally.
The summer rally is over it’s a holiday weekend with low trading volume and bad news is pervasive..A decent jobs report on Friday brought in buyers in early hours until Russia intervened with a Nord Stream suspension of natural gas to Germany. Just another risk-off day where raising cash is the new play. So don’t fight the FED eh?
Healthcare stocks are normally a defensive weighting in your portfolio but in this market who knows? Still the XLV down 11 % YTD is better than the DOW down over 13% and the S&P down over 17%. Biotech stocks were beginning to shown nice gains but speculative interest waned in mid-August as they sold off. The XBI sold off but is still up 3% over 30 days. We are still expecting a Q4 rally In speculative biotech and the XBI if it can hold the $80 level.
Our small/mid cap picks sold off over one month with the IWM down 3.7% but CCXI, EVH and MRTX still look good. Modern (MRNA) will need help from their R&D update this Thursday.
Large Cap Biopharmaceuticals Offer Good Value.
We have favored large cap biopharma over the years because of new product potential, dividends and relative safety. We recently published a review . Lately with market volatility rotation has been a factor with a shift to treasury bonds and energy with rising rates. Many bearish analysts have recently focused on valuations of large cap growth stocks saying with short term treasuries yielding over 3% there is a good alternative to stocks. I might add that the IBB has underpeforrmed down over 20% so not a good biotech trading option for the short term. The XLE Energy SPDR ETF by contrast is up 44% YTD!
So maybe we need to look at biopharma valuations under the pall of higher rates and government intervention on pricing. But Price to Sales ratios of about 5 and Forward PEs under 20 are not out of line with the S&P PE of 21.
11/6/22…Bear Market Metrics Two terms have crept into the lingo of market pundits: PE Compression and Free Cash Flow yields. One continuing bear market analysis narrative says with slower growth and a FED induced recession coming a market PE above 20 is unsustainable. A good stock to further analyze is the biggest and one of the most widely held stocks in healthcare United Health (UNH). UNH has a P to free Cash Flow of 33 and a PEG of 1.88 not cheap but good value considering it is still a growth stock.
|10/25||%||12/31||% Perf||12/31/21||% Perf||9/3/22||%Perf||
|iShares NAZ Bio||IBB*||136||15||151.5||25.7||152.62||-31.14||121.19||(20.6)||-1.17|
|iShares Russell 2k||IWM||163||10||196.4||18.3||222.45||-20.36||180||-19||-3.7|
|SPDR S&P Bio||XBI||117||10||140.8||48||111.96||-38.67||83.73||-25.21||3.4|
|T.Rowe Hlth Sci||PRHSX||n/a||10||99.65||n/a||104||-25.4||87.39||-16||-2.73|
|iShares U.S MedT||IHI||50||10||54.83||65.85||-24.67||50.23||-23.72||-6.79|
|Bristol Myers Sq||BMY||3.77||68.61||10||-6.37|