How Did Healthcare Stocks Perform Over This Volatile Month?…Update-2

12/10/21Update-1 A good week with S&P At New Highs despite inflation at 40 year highs at 6.8%. Infotech leading way up. Small cap biotech still lagging near lows for the year. XBI at $110 could not hold mid-week gains. Same pattern for ARKG now at $60.74 near lows at $56. Large cap biopharma  and healthcare still strong holds: ABBV PFE  REGN RHHBY UNH VRTX. Healthcare XLV up for the week but IBB down.

12/6/21 Update-1…Market rallies on omicron variant optimism less severity. Russell 2000 up 2% with some our top small/mid caps moving up CYRX and VCYT. Healthcare lags but ABT, ABBV and UNH show gains. Vaccine stocks BNTX and MRNA plummet double digits. VRTX holds $205 level. Drug pricing legislation remains the major headwind to the biopharma industry.

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Healthcare Performance in a Volatile Month

• Small cap biotechs continue weak-ARKG and XBI get no traction.
• Quality large caps remain good holds: ABBV, ABT, REGN RHBBY,UNH.
• Sector shift to large cap cyclicals and value underway.

It’s been a rough month for small cap biotech stocks amidst a general correction in the market which brought general indices down about 10%. Despite breakthroughs in vaccines, antivirals, sequencing and molecular diagnostics investor interest in life science stocks has waned.  Analysts and specialist hedge funds hit with big losses in the sector blame potential passage of drug pricing legislation by Congress and overvaluation of an avalanche of young companies that are overvalued yet have no clinical stage products.And overlay these issues with the strong statements by Chairman Powell on the taper and inflation concerns and you have risk aversion. As we await more data on the omicron variant and how effective our current vaccines will protect we have a greater period of uncertainty.

Over the past week the market has moved toward value and industrial and away from the explosive growth and high PE of tech stocks which have traded on momentum. Among the weakest sectors were the Russell 2000 down 3.86%, the NASDAQ composite don 2.62%,, and Consumer Discretionary down 2.36%. So for the short-term we have big concerns about GDP growth from COVID yet intermediate expectations of inflation and rising rates.

Review our model portfolio performance below and notice that the XLV is still  up 18% YTD led primarily by United Health (UNH) up 31% YTD. We previously recommended a more basic portfolio with the XBI AND the XLV but as you can see the IBB has taken a hit and is now at a loss for 2021 down 2.25% again today at $145.

Our strongest recommendation has been to overweight large cap biopharma stocks like ABBV,REGN and RHHBY that have growth and strong pipelines. We recently recommended Vertex Pharmaceuticals (VRTX) at around $180. As another contrarian play have a look a laggard Bristol Myers Squibb (BMY) now at $57.39.

About mid-year we added medtech stocks to our portfolio with  the IHI or FSMEX.