Biotechs Continue To Lead The Market

NASDAQ registered its third day of gains up 2.38% for the period and life science stocks followed. The NAZ is now up 3.34% YTD.

Biotech stocks are way ahead of the market  YTD with our top ETF pick (FBT) up 31% YTD and 3.66% over five days.The IBB is up 18.7% YTD and 4.85% over five days. The biotech sector hit a low around October 14 but did not test the recent mid-July lows.

The Rayno Large Cap Biopharmaceutical Portfolio also hit a low on October 14 and is up 21% YTD and 9.27% over 3 mos. Our Mid-Cap Biopharmaceutical Portfolio is up 8.11% YTD and 6.65% over three months.

So if you are a biopharma investor and only did ETFs you are up at least 21% YTD. We recommended a core position in large caps and 15-20% in cash.

Tools And Diagnostics

We will review our portfolio of diagnostics and tools  stocks as the earnings roll out but many of these stocks are up YTD. Look at Abaxis (ABAX), Exact Sciences (EXAS), Genomic Health (GHDX) and Hologic (HOLX) all winners YTD.There were plenty of losers among the smaller caps and we review these after Q3 earnings. Illumina ILMN) reported a solid quarter tonite and the stock is up 10% after hours to $181 Illumina, Inc. beat estimates and raised guidance. Revenues for Q3 were $481M a 35% increase over same quarter in the prior year and GAAP net income of $93M or $0.63 per common share. The Company entered into  strategic partnerships with AstraZeneca, Janssen, and Sanofi to develop a Universal NGS-based oncology test system.

Small Caps Lag But Should Outperform in Q4

We are looking for small cap stocks that can outperform in Q4. We posted a preliminary list last week and will add more depending on the tenor of the market and performance of the Russell 2000 as tracked by the ETF IWM which is recovering from a bottom around $104 to $108+ today. All small caps on this speculative list are up over five days: CLDX, FCSC, GLYC, PACB and the smaller cap  weighted ETF XBI up 8.57%. The trend is positive because most biotech stocks turned green ahead of last week’s rally. Keep in mind the technicals still rule and we are still in a risk-off environment.

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