Large Cap Biopharma Performance and Valuations 4/28/19

Large Cap Biopharma Stocks: Performance and Valuations for 2019.

In 2019 the IBB was a less risky pick for a biopharma portfolio; ABBV and BMY look good.

Merck (MRK) and Vertex (VRTX) were the top winners since 1/15/18.

There was a severe correction in biopharma stocks two weeks ago so these valuations are quite good considering that peak values on the large cap focused IBB was 4/5 and trough values were 4/22.Biotech and healthcare stocks rallied Thursday and Friday of last week.Although the IBB underperformed the NASDAQ-100 (QQQ) up 27.25%  in 2019, considering the correction, the performance YTD up 10% was not bad. The healthcare sector lagged many sectors in 2019 up only 5.6%.

We will update the valuation grid after all earnings come in next week: GILD,  MRK, VRTX and REGN reports May 7.

Some takeaways:

• The small cap equal weight XBI continued to outperform the IBB because the stock holdings are less earnings dependent and have top line growth plus M&A potential.
• Over 52 weeks the leaders are CELG,MRK and Roche (RHHBY) -not in matrix.
• The 52 week laggards are BIIB, ABBV and BMY.
• Some favorite stocks by analysts are: ALXN, MRK and VRTX.
• Valuations measured by P/S and Fwd PE favor ABBV, BIIB, CELG and GILD.
• Stock picking among the large caps can be challenging because BIIB, ABBV and REGN were losers. It would be better to split your positions 50/50 IBB and XBI.

Look at Abbvie (ABBV) as a contrary value pick (YTD loser) with high yield and Bristol Myers (BMY) as a Celgene (CELG) play after dust settles on merger.

Disclosure: long ABBV, BMY, RHBBY, GILD, MRK.