Update-1 Large caps were mixed but our top picks are doing well: ABBV,BMY,MRK,RHHBY. But bad news from JNJ and BA may have curbed buyer’s sentiment. United Health (UNH) off Mondays lows of $220 to $245. In summary it looks like a good time fo adding larger cap healthcare weighting.

  • Roche  (RHHBY) Delivers top line growth-stock up this week.
  • XBI started well ended weak at $78.65; has to hold $75 for uptrend.
  • IBB off yesterdays highs now at $102.27.
  • Mid caps mixed winners are: ALNY, BMRN, SGEN, ICPT; big, losers are EXEL,MRTX, IMMU, NKTR, NVCR,RARE,XNCR .
  • Medtech holding up well with IHI near 246.


Strong Earnings Spark Healthcare and Biotech

Macro News Retreats to Background- China Truce?

Time to Review Equity Portfolios For Healthcare Weighting and Rotation 

We have written in 2019 about lagging healthcare and biotech stocks because of potential health insurance upheavals, the politics of drug pricing and tepid news on biotech drug development with fewer breakthroughs. Healthcare and biotech stocks are among the weakest sectors in 2019 after a good 2018. As we roll through earnings season a picture should emerge on top line growth guidance for larger biopharma companies and how they might counter bad sentiment. Historically drug stocks offered steady growth and reliable dividends making them good anchors and even defensive  for equity portfolios.

Today Johnson and Johnson (JNJ) rose 1.62 % on better than expected EPS of $2.12 above expectations of $2.01, despite being the target of several lawsuits the most serious being with their opioid business lines and ongoing baby powder litigation. Sales of $20.7B reflected operational growth of 5.2% and adjusted EPS growth of 3.4%. Strong performance was attributed to underlying growth in pharmaceuticals and Medical Devices. Biological products were strong:for immune- mediated inflammatory diseases, (check earnings link above for pipeline updates).

United Health (UNH )also beat Wall Street earnings and revenues estimates of 3.47% and 1.2% respectively and the stock soared over 8%. UNH made a double bottom in 2019 and gapped up today. Price to sales is a very low 0.97 with a forward  of 14.40. We nibbled on UNH early this month. The IHF iShares Healthcare Providers ETF soared 4% today well off recent lows.

What Next for Your Healthcare and Biotech Portfolio?

The Healthcare Select Sector SPDR Fund (XLV) was up 1.82% today but technicals are mixed:

Healthcare and biotech stocks rose broadly today and we should track the impact of company earnings over the next few weeks, Hopefully the earnings reports will be the focal point of the market and not macro news especially now that FED policy supports the market.

So how did the sector perform today:

  • We have focused on large cap biopharma with dividends and most did well today today: ABBV, BMY, GILD. Some like MRK,RHHBY and MRK are already near 52 week highs.Yesterday we added Alexion (ALXN) and it is up 3.47% to $104.81 today. The IBB was up 1.83%.
  • MedTech has been a major component of our healthcare portfolio and the IHI iShares Medical Devices ETF was up 1.1% today and one of the best subsectors YTD up almost 30%. We also hold one of the best MedTech funds Fidelity’s FSMEX up 14.5% over 24 mos.We also own blue chips like ABT and BAX.
  •  Mid cap biopharmas were strong today with big winners: AGIO, ANAB, BPMC, ICPT, NBIX,NKTR, XNCR etc. many of the mid-caps are below their mid-point over 12 month but are hard to trade.
  • Gene therapy stocks rose in a green screen mode but they have been very disappointing in 2019.

We own XBI at about $75 as a play on mid and small cap biopharma stocks Today it is up 2.5%. If you trade small cap biotechs without earnings consider “day trading” your ideas before big losses mount. The Russell 2000 was up1.15% but we would like to see strength in small caps before plunging into more speculative life science stocks. We own several positions in small caps but hope to make money in AMRN and TDOC as we did trading them in Q1.

We are long a diversified portfolio of large cap biopharma and medtech stocks and most recently bought ALXN and XBI.

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