Update-1 A Bit of a Rally despite the JNJ Vaccine Setback
We have the best day for life science stocks in weeks despite a “pause” in distribution of the JNJ vaccine due to blood clots. Many experts don’t think it is a major problem just a precautionary hold action. Vaccine stocks rallied on the news: BNTX up 6.88%, CVAC up 3.8%,INO up 5.85%, MRNA up 7.8% and NVAX up 10.82%. Expectations are that the leaders will take share from JNJ. I tried an option play weeks ago for BNTX at $100 but they expired. Options are very difficult so better to have multiple positions in time and strike price.
We traded into ARKG at the $88 handle but still not back into XBI near its 2021 lows just under $130.
- Most coronavirus Dx and Rx plays were up in addition to vaccines as the variant has spiked the numbers in some States and the younger population: ABT HOLX QDEL TDOC VIR.
- The IBB was up 1.85% and among our new picks BMY was up 1.42%.
- Gene therapy was green with the favorites all up:CRSP 5.57%, EDIT 5.44%, NTLA 5.48%.
- Mid caps were green with some notable winners:FATE RARE and RGEN. But the really big news was Novacure (NVCR) up 49.6% to new highs on an upbeat DMC review of its lung cancer (NSCLC) treatment. The Company will submit an IDE for its combination therapy using TTFields.
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How To Play Lagging Healthcare Stocks
Conservative Healthcare Portfolio: 2020-21-Key Takeaways
- The Healthcare Select SPDR Fund (XLV) gives you the most diversified play in healthcare returning 11.4% in ’20 and 4% YTD.
- The iShares NASDAQ Biotechnology ETF (IBB) adds more Beta and Biopharma weighting returning 25.7% in ’20 and (1.82)% YTD.
- Biotechnology underperformed in Q1 ’21 and Life Science Funds underperformed major ETFs; the XBI is the bellwether of bull markets.
Last October we created a Conservative Healthcare Portfolio that required less rebalancing.You can see the results in the latest data. Our model portfolio would have limited your losses YTD ib the XBI sell-off. With the recent bullish moves in the market the DOW, NAZ and S&P have reached new highs whereas Healthcare stocks are lagging. Analysts are more bullish on the economy and the ” reopening trade” is on. Over the past weekend and pronounced in late Friday’s close almost all sectors were up big. Here are some of the S&P winners from last week: InfoTech 4.66%, Consumer Discretionary 4.23%, Telecom Services 3.17%, Financials 1.9%,Industrials 1.76% Healthcare 1.33%. Commodities are also picking up : wheat, corn, silver etc. and the Invesco Commodity Tracking Fund ( DBC) is up steadily in 2021.
As of December 2020 the S&P 500 is more weighted toward InfoTech 27.6% and less toward healthcare 13.44% so you need to consider this in your portfolio development. Healthcare stocks are still important but lately have lagged other sectors.And as you can see in 2020 when momentum investing was hot the XBI was up 48% largely due to the COVID theme.
Keep in mind that the healthcare sector is more defensive than infotech which moves with the market and the economy. For review here is our post from the 11/18 biotech bear market.
XBI weekly chart since 12/19 and 3/20 double bottom.
Consider the following healthcare trading and investing strategies for Q2 2021 with some bullish bias because of important scientific meetings coming up and rally off the bottom.
Consider picking large cap winners rather than holding Merck (MRK) and the IBB. Also add more XBI betting on a Q2 rally.The IWM correlates with mid and small cap biotech. United Health (UNH) is a core healthcare stock.
- Conservative– Use the weighting below for maximum diversification. Alternatively go with a simple weighting of 50% XLV and 50% IBB for more biopharma.
- Moderate-Rebalance large cap biopharma to 20% and add ABBV, BMY GILD. Take out MRK. Drop IBB to 15% Drop XLV to 15%. Up XBI to 15%. UNH and IWM remain the same,
- Aggressive– same as above on Large caps 20%. Up XBI (or mid cap stock picks) to 25%, XLV 10%, IBB 10%. UNH 25% IWM 10%.
| Initial | |||||||||||
| Ticker | Price | Wgt | 11/27 | %Perf | Price | QTR | 2020 | Price | %Perf | High P | |
| 10/25 | % | 1 mo. | 12/31 | % | % Perf | 4/9/21 | YTD | 2021 | |||
| IBB | 136 | 25 | 143.22 | 2.27 | 151.5 | 11.9 | 25.7 | 148.73 | -1.82 | 170.72 | |
| IWM | 163 | 10 | 184.37 | 16.56 | 196.4 | 30.9 | 18.3 | 222.59 | 13.53 | 234.42 | |
| MRK | 80 | 10 | 79.86 | 2.4 | 81.77 | -1.39 | -10 | 76.31 | -6.71 | 91.58 | |
| UNH | 330 | 25 | 337.94 | 5.44 | 350.7 | 12.5 | 19.3 | 376.3 | 7.31 | 379 | |
| XBI | 117 | 5 | 131.46 | 11.95 | 140.8 | 26.3 | 48 | 129.63 | -7.92 | 174 | |
| XLV | 108 | 25 | 109.44 | 3.35 | 113.4 | 7.55 | 11.4 | 117.95 | 3.98 | 118.15 | |
| DIA | 337.86 | 10.49 | 337.86 | ||||||||
| SPY | 411.49 | 10.06 | 411.49 | ||||||||
| QQQ | 337.11 | 7.49 | 337.11 | ||||||||
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PRHSX
|
* | 11.6 | 99.12 | 0.27 | 106.6 | ||||||
|
FBIOX
|
* | 13.75 | 21.51 | -14.58 | 27.73 | ||||||
| XPH | 49 | -5.88 | 56 | ||||||||