Biotech Bull Market-Trends to Watch #2: ETF Review-FBT XBI

Biotech and Healthcare ETFs Hit An All Time High–Another Rally Coming Today 3/20

  • M&A: Recent buy-outs of Cubist (CBST) for $9.5B and Pharmacyclics (PCYC) for $21B have raised the valuation bar.
  • The healthcare sector remains strong and biopharmaceuticals are key to sales growth.
  • Breakthroughs in genomics, targeted oncology and HCV drugs are blockbuster growth areas.

On February 13, 2015 we started a series of posts on the five year bull market in life science stocks. Today we will review the sector through the most popular ETFs, all of which have been good investments and have outperformed the S&P. All of the major indicators are still bullish although IPOs have slowed a bit.

Here are charts of three major ETFs. In early February they were close up about 6% YTD. By early March XBI and FBT pulled ahead no doubt through picks like CBST and PCYC. FBT is still the one year leader up 55.4%.

All prices below are as of 3/19

The largest biotech mutual fund Fidelity Select Biotechnology is doing better in 2015 up 20.64% matching IBB but has lagged other ETFs over one year. Over the longer term it should do better because of reversion to mean performance during market corrections.The top holdings are the well known large and mid cap selections with the exception of Receptos (RCPT) and Puma Biotechnology (PBYI).

XBI $238 Up 27.63% YTD, 50.37% one year

The SPDR S&P Biotech ETF (XBI) is the current leader up % YTD. Net assets are growing and the current market cap is $2.1B. The XBI holdings are more equal weighted and concentrated in small to mid cap biopharmaceutical stocks with a lot of turnover. Performance was enhanced in 2015 with Foundation Medicine (FMI) and Pharmacyclics (PCYC) both involved in high profile deals. Among the current top ten picks are: EXEL, HALO, OPK and NBIX (See up-to-date holdings).

FBT $126.21 Up 23.7% YTD, 55.43% one year

Our top pick over the years has been the First Trust NYSE Arca Biotech ETF (FBT). Net assets are growing and now at $2.8B. The holdings are diverse with more focus lately on mid caps and life science CROs like CRL and Q. Among other top picks are : ICPT, NVAX, CLDX, BIIB, INCY, SGEN and UTHR (BIIB,CLDX, and SGEN are also Rayno Biopharmaceutical Picks).

IBB $362  Up 20.41% YTD, 43.9% one year

The largest ETF with Net Assets of $7.94B is the iShares NASDAQ Biotechnology (IBB). The top holdings are concentrated  in lager cap names with the well known names such as BIIB, CELG, AMGN, REGN, ILMN and VRTX. Unlike the FBT and XBI they have not migrated to smaller cap stocks.

XLV $74.57 Up 9% YTD, 27.6% one year

A more diversified healthcare ETF is the Healthcare Select Sector SPDR ETF (XLV) with assets of $13.27B. The holdings include big pharma names like JNJ, PFE, MRK, as well as large cap biotech AMGN,GILD,BIIB and CELG. Many dividend stocks are included and the yield is 1.27%.

PBE $59.26 Up 18% YTD, 33.3% one year

The PowerShares Dynamic Biotech and Genome ETF is also growing with a net asset value of $526M.Holdings include the usual large caps: BIIB, GILD, REGN, AMGN plus some mid cap biotechs like BMRN, INSY and tools players like ILMN and SIAL.

Yahoo interactive Chart of FBT, FBIOX, XBI

Rayno Life Science Portfolios-see posts

Large cap motif: Up 12.56% YTD  ALXN AMGN BIIB GILD REGN RHHBY

Mid-cap motif: UP 41% YTD  ALKS CBST CLVS PCYC SGEN VRTX

Small cap motif: Up 54.7% YTD  CLDX FCSC FMI ……

 

Disclosure : Long FBIOX, FBT, RHHBY, SGEN; long and short a variety of biotechs on a daily basis.

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