With biotech in a funk this timely article from Barron’s should help.
Barron’s to the Rescue: Future of Biotech, article offers picks from a new Roundtable
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Some of the picks ASND, MDCO,MGTX,NVTA,RGNX, SRPT, VRTX
Update-2 9/28 NASDAQ down 1.13% to 7939 and Biotechs Continue to struggle
- Mixed day Friday with some green AGIO ALNY SGEN SRPT notable.
- IBB down 0.78% to $99.30, large caps in green-ABBV,BMY, RHHBY
- XBI down 0.77%.Update-1PM 9/27 EDT Markets weak on Geopolitical Funk
- Healthcare providers bottoming process: IHF UNH XLV
Update-1 PM 9/27
- Biotech red screen day IBB down 2.21%,XBI down 2.8% to $77 below support.
- Still holding large cap biopharma: ABBV, GILD, MRK,RHHBY.
- Healthcare stocks weak: UNH, XLV.
- DX and Tool stocks up: BRKR, TMO, VCYT.
- Small cap speculative stocks among worse plays today.
Mired in Macro-Biotech Sector Loses September Gains: RISK OFF
Abrupt Sell-Off in EarlyTrading: Geopolitics, China Trade War, Impeachment Inquiry ,Brexit etc
Consumer Confidence Drops-A Bulwark of the Market
Trump lambasted China at the UN undermining any near term hope of a deal that would end the trade wars that most economists and CEOs say is slowing global growth. Political turmoil rose with the threat of impeachment by DEMS if Trump continues to ignore document requests related to the Ukraine call incident. And consumer data was weaker than expected with consumer confidence for September dropping to 125.1 under expectations of 133.5.
This breaking news as well as Trump’s fiery hawkish speech at the UN caused all major indices to fall with the NAZ down 1.46% to , the S&P down 0.84% and the DJI down 0.535.
Biopharmaceuticals and life science stocks had been in a slight recovery mode in early September after a sideways summer. But now we have begun a downtrend off the April and July top. The IBB closed down over 2% today to the $102 level close to 2019 support of $100.
Here are some trends to watch as we go through this historically tough period through October:
- Healthcare lagging: Biotech stocks track the fundamentals of healthcare that is currently enmeshed in political uncertainty regarding policy. The XLV was down 1% today to the $90 level where it was last February 1. United Health (UNH) was down 1.65% today and down 5% YTD. Moreover most other sectors-chips, technology, utilities- have offered great investment opportunities in 2019.
- Technicals are in a downtrend: The XBI is still up 12% YTD but most of the gains occurred in March-April time frame.
- Value vs Growth: despite the threat of drug pricing legislation and future healthcare policies we need to see stabilization of large cap stocks many large cap biopharmas like Abbvie (ABBV), Merck (MRK) and Roche ADR (RHHBY) offer good value and dividends.
- Small Caps Easing: Most biotech stocks especially ones that are involved in deals, M&A and potential breakthrough products and technologies are small and mid-caps. If the smaller cap ETFs like the IWM and IJR are in a positive trend then biotech stocks can have better support from investors.The IJR is weak in September and has a triple top in 2019 although still up 12% YTD. The IWM has a quadrouple top in 2019 peaking in March.
Now with the Democrats moving ahead with an impeachment inquiry and a trade deal with China pushed out in time we are truly mired in the uncertainty of a macro geopolitical news cycle. The next major data window will be Q3 earnings and guidance, but for the next 2 months biotech stocks may not reflect market and company fundamentals.We need time to assimilate this news but for now a big issue is still the global economy and tariffs.