But Momentum Is Easing As Investors Cash Out-IBB Is 5.5% Off Jan 22 Highs
Caution Rules With Selling Pressure-Raise Cash to 15%
January 2014 was up 12% which may be the best month ever in biotechnology at peak prices on January 22. But with the sector up over 62% over one year and 2013 being the best year ever in life science stocks it is time to take profits. Macro headwinds, concerns about FED tapering and weaker US economic data have dimmed sentiment. Watch technicals as the market is in a bearish transition. Red screen today in biopharma.
But look at the huge moves in January as ebullience was flowing from the annual J.P.Morgan Healthcare Conference on January 13.
- Pharmacyclics (PCYC $127.65) up 25% the poster child of momentum stocks hit a high of $145 hitting the magic $10B market cap level.
- Alexion (ALXN ($154) up 19.5% reported better than expected revenues with a 38% increase in sales of their only drug Soliris.
- Biogen Idec (BIIB $303) was up 12% as Q4 profit soared on multiple sclerosis drugs. Stock rallies despite weak outlook.
- The IBB ($240) was up 8.3% but the XBI ($144) outperformed up 15.4%.
- We recommended a sell on Celgene (CELG) on 1/6/14 and it is down 10.77% YTD. Look for technicals to improve here as the stock is stabilizing.
- Three of our picks were acquired in 2013: Astex, Optimer and Viropharma.
- Two of our latest picks: Vertex (VRTX $77.90) up 24% since November and Roche Holdings (RHHBY) a new pick last week at $67.
As the correction runs its course avoid small caps (e.g. EXEL down 21.5% from Jan highs) and especially momentum micro-caps where we see a lot of shenanigans. Our model favors large caps.
Rayno Diagnostics and Tools stocks will be covered later today. CPHD and ILMN (up 39.4% in one month!) are our best picks.
Rayno Biopharmaceutical Picks