Update-2 11/29 …New Rule- after four downgrades at new lows a stock is a buy. VRTX up over 4% today to $191.5.  Is an upgrade coming before or after JPMorgan Healthcare?

Update-1 11/23/21… Large cap glam techs stocks take a hit in an another sector rotation. Energy and financials are strong. Inflation talk picks up with bond yields up. TOP PICKS:  Our latest long call Vertex Pharmaceuticals (VRTX) was up almost 3% to $186 handle. Abbvie (ABBV) gets an upgrade now $118. UNH up 2% to $447.  Smaller caps weak and major biotech ETFs weak.


Biotech Stocks are Due For a Rally

  • Biotech ETFs are trading near their 52 week lows: ARKG and XBI.
  • Small and mid cap growth stocks took a hit this past week.
  • Biotech sentiment has been crowded out by other sectors-tech, EVs etc

There are many rebalancing trades left in your stock portfolio but biotech is in the doldrums. Inflation was on many investors minds but most analysts believe equities are the place to be even in times of ~6% inflation and rising rates. Over the past week tech stocks continue to press toward new highs with the QQQ at the $404 level recovering from November lows at $390.  Traders have moved on to hot sectors driven by earnings and growth in tech and consumer stocks. Sector rotation is the trend, Biotech was hot during peak pandemic times and is due for a rally.

The economy is strong as shown by a consumer willing to spend with the potential of strong holiday sales ahead, The infrastructure bill passed with huge investments expected in broadband, transportation, and healthcare. The XLV was flat for the week at $133 but up 1.88% for the month. Our top healthcare pick UNH was down for the week and up only 1% for the month. Earnings were good for large cap biopharma stocks and the following stocks are near 52 week highs: GSK, LLY, PFE, REGN and RHHBY. So healthcare is being viewed as defensive as the economy picks up.

Small Caps Were Down This Week

Investors want growth and although biopharma offers value+dividends+growth it can’t offer the explosive growth of consumer discretionary, infotech and semiconductor stocks. And small cap speculative biotech stocks are seriously lagging with the bellwether ARG and XBI near 52 week lows. So recently we have focused on several life science stocks that offer unique technology and growth Here is an update with one addition Quidel (QDEL) that was previously on our speculative list. We deleted PACB and TDOC from our speculative list because they were too volatile.We may add back speculative stocks if technicals improve.The IWM was down 2.85% and the IJR down 2.22% this week.

Life Science Focus Stocks

It was a tough week for our focus stocks but we moved Quidel (QDEL) to our focus stocks and QDEL got an upgrade from Goldman. Here is the update:

Company Ticker P P Revs MCap P/B Recom Perfor Perfor
5/21 11/20 $M $B 6 Mo % 1 Mo %
Cryoport CYRX 51 72.25 214.5 3.36 5.22 1.5 38 -2.85
CRSPR Ther CRSP 124 82.24 902.4 6.35 2.5 2.1 -29.19 -16.19
Quidel QDEL 125 152.5 2 6.03 3.89 2.5 26.5 16.3
Veracyte VCYT 36 49.3 186.7 3.23 3.11 2 32.8 6.14

New Long Idea

it’s a tough time to trade small/mid cap biotech stocks as even the IBB at $154 shows little interest. But you might want to look at Vertex Pharmaceuticals (VRTX) as a  contrarian long just above the $180 handle.Vertex has the worst looking chart I have seen in a long time. There were four or more downgrades on the stock over the past few months and the stock was at $230 in January! The Company is a leader in cystic fibrosis therapeutics albeit with growth slowing. VRTX has a forward PE at 13,7 and a Price/Sales of 6.61. Not an overpriced stock. The trading bet would be that by the time the JPMorgan Conference  rolls around in January you will see news that takes the stock to the $200 level.

Long CRSP, CYRX, QDEL, VCYT, VRTX and  large cap biopharma stocks.

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