Biotech Funds and ETFs Continue to Lag…Update-2

4/1/22 Blah market but biotech and healthcare holds.Rally at last 30 min. Spec small caps on a green screen with both ARKG and XBI up. We are trading these stocks off a bottom. IWM up 0.9% to $207 level. Gene therapy stocks rallying: CRSP, EDIT, NTLA. Large caps strong:LLY,  MRK, RHHBY, VRTX. IBB up 2.18%.

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3/29…Small cap spec stocks regain momentum for a great trading day. Key tracking ETFs were up: ARKG up 6.64% to $48.52, XBI up 4.29% to $93.56. Our notable small cap bio movers: CRSP up 4.97%, CYRX up 8.78%, DNA up 22%,EDIT up 8.96%, MDGL up 6.45, TDOC up 9.09%, VCYT up 11% etc. We have seen bounces like this off the bottom before without follow -through. But the Russell 2000 (IWM) was also up 2.67% so this could be a trend toward SMID  caps.

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Biotech Sector Continues to Lag in 2022

• Large cap biopharmaceuticals outperform over 52 weeks: ABBV, AZN, BMY,  LLY, REGN, RHHBY, VRTX.
• Small and Mid caps fade into 2022 tracking Russell 2000 (IWM) down 7% over one year.
• Trading opportunities still exist but needs momentum in XBI. Q1 earnings could be pivotal.

Last week we reviewed the major biotechnology Funds and ETFs and despite a few pops in small and mid caps the sector lagged. The peak valuations in biotechnology stocks was hit in Q1 2020.The NASDAQ composite gained 1.98% for the week as technology stocks regained some momentum. The NASDAQ-100 (QQQ) ETF gained 2.24% this week while healthcare shares (XLV) were flat. As we have emphasized over the past several months large cap biopharmaceuticals should be overweighted in a healthcare portfolio. We also emphasized the need for diversification with UnitedHealth (UNH) and (XLV). We still hold XBI a trade at a loss and  “SMID” biotech stocks continue to lag large caps. We have updated the chart to include results for the week showing continued losses for biotechnology ETFS and Funds YTD.

Continuing Rotation into Energy and Materials 

It’s no secret that market sectors driving inflation are leading the market. With the US economy still strong and the War in Ukraine limiting supply of nat gas and raw materials, producer costs are rising. Just over the past week the S&P 500 Energy Index was up  7.42% and the S&P 500 Materials Index was up 4.1%. The Bloomberg Commodity Index was up 5.26% compared to the S&P 500 up 1.79% and S&P 500 Healthcare down 0.23%. Watch the sector trends with your portfolio because if you are not diversified your portfolio will underperform.

Notable Biotechnology Stocks within the Funds and ETFs

Our top biotechnology picks in 2020-21 have been Abbvie (ABBV), BristolMyers Squibb (BMY), Regeneron Pharmaceuticals (REGN)  and Vertex Pharmaceuticals(VRTX). We also hold Merck (MRK), and Roche (RHHBY). We have traded innovative mRNA vaccine stocks BNTX and MRNA but have definitely missed the  big upside and downside in these volatile stocks, throughout the pandemic. Among the biopharma stocks that are major holdings in the sector and should be considered in an aggressive portfolio are: Alnylam (ALNY), AstraZeneca (AZN), Blueprint Medicines (BPMC),  Eli Lilly (LLY), and Seagen (SGEN). We have also done well trading Editas Medicine (EDIT) and  Madrigal (MDGL),

Healthcare Portfolios are Adding Providers

In February we updated our model healthcare portfolio to add diversification with T.Rowe Price Health Sciences (PRHSX) and iShares U.S.MedicaI Device (IHI) down 9.28% YTD, giving more weight to diagnostics and medtech. Portfolio rebalancing should be considered in light of biotech weakness. Our Healthcare Portfolio has done well because of the inclusion of United Health (UNH). Now many healthcare funds have added provider stocks such as ANTM, CVS and HUM. The iShares U.S. Healthcare Provider (IHF) is up 12.8% over one year but flat YTD.