3/25 2:30 p EDT Large cap core holdings near 52 week highs: ABBV, BMY, MRK, REGN, RHHBY, VRTX.
Recent trades doing well: EDIT, EVH. Sold MRNA at a small profit. XBI stalled near $90. SMIDs in the red. Vaccines losing ground BNTX, NVAX MRNA.
Energy financials and materials lead market up.
======
3/22 Update-1…The rally in speculative “SMID” biotech stocks continued today with the ARKG up 4.26% to $46.53 and XBI up 3.58% to $92.21 both showing nice gains. Most of our recent small/mid cap trades are up: CRSP, EDIT, EVH, TDOC, MRNA, XBI. Most $BB mid-cap biopharmas were in the green. The IBB was up 1.9%. Of course we are just off the bottom of the 52 week range so it’s hard to call it a trend but good to see the appetite for smaller cap biotechs. And there is plenty to worry about with the war in Ukraine, headwinds of rising rates from the FED and high stock valuations.
=====
Performance of Biotechnology ETFs and Mutual Funds
- Biotech investing can be difficult for short-term traders but can offer good returns over five years if balanced with other healthcare positions like the XLV.
- In general ETFs offers better performance and easier entry for re-balancing portfolios compared to mutual funds. But we would favor holding an ETF paired with the T.Rowe price Health Sciences Fund (PRHSX) for better diversification.
- Biotech underperformed tech over 5 yrs.as an investment sector and many ETFs peaked in Q1 2021. The S&P 500 (SPY) was up 90% over 5 years.
- Review the S&P 500 sector ETF map.
If you scroll through my articles over the past 20 years you can see the volatility with the boom and bust cycles of biotechnology investing. One message that comes through is that biotechnology companies can always find investors because of new drug breakthroughs as the molecular causes of in genetics, infectious diseases or the environment are better understood. Moreover medical technology has advanced with robotics and imaging that provide diagnosis and treatments for cardiovascular diseases and cancer.
But how do you invest for the longer term and if you do not have access to venture funds or have sufficient knowledge of life science technology to pick stocks? One obvious approach is to buy mutual funds or ETFs and we have covered each of them over time including a Model Portfolio which tries to mitigate risk. Here is a post from 2014 that compares managed biotechnology funds and ETFs.
Over the past week we have seen a risk appetite develop for “SMID” cap biotechnology stocks that may lack earnings or financial metrics to support their valuations. Large cap biopharma has always been overweighted in our coverage because of earnings growth and dividends. But small and mid cap stocks without earnings may depend on milestones and M&A difficult to predict. Biotech ETFS soared this week with the IBB up 8.57% at $131, down 14.57% over one year; the XBI up 8.92% at $92.16 , down 34.4% over one year. However over the longer term all ETFs provided a positive return.
We did not include in the summary the well known ARK Genomic Revolution Fund (ARKG) because it is relatively new and quite volatile. ARKG is down 24.59% YTD, and 47.91% over one year.But because it has many favorite high flying momentum stocks it is still up 124% over five years with a high price of $115. The Top Five Holdings are TDOC, EXAS, PACB, CDNA and REGN which is a favorite large cap biopharma and not so volatile.
This is Part I. In Part 2 we will look deeper into the holdings of various ETFs and Funds.
Disclosure: Long FBIOX, PRHSX and XBI as a trade, and many individual stocks.
% Performance of Selected ETFs and Mutual Funds
| Biotechnology | ||||||
| 3/20/22 | ||||||
| Major ETFs | Price | YTD % | 1 Year % | 5 Year % | High P 5 yr | |
| FBT | 149 | -7.88 | -7.34 | 41.53 | 186.51 | |
| IBB | 131 | -14.17 | -14.54 | 33 | 177.37 | |
| PBE | 62.31 | -12.49 | -15.51 | 45.7 | 84.86 | |
| XBI | 92.16 | -17.68 | -34.4 | 29.77 | 174.79 | |
| QQQ | 351.5 | -11.65 | 12.64 | 166.91 | 408.71 | |
| XLV | 137 | -2.77 | 19.47 | 82.26 | 141.98 | |
| Biotech Funds | ||||||
| FBIOX | 16.38 | -15.35 | -33.22 | 20 | 29.72 | |
| PRHSX | 94.59 | -9.12 | -3.22 | 42.56 | 117.14 | |
| JFNAX | 64.08 | -5.4 | -6.9 | 28.19 | 77.12 | |