Update-4 JY 12…Some biotech strength in usual suspects but exciting news drives smaller more speculative stocks. Recursion pharmaceuticals (RXRX) up 78% on $50M Nvidia drug discovery deal. As rumored AI meets biotech.Trading rally for sure as more AI plays likely.
- SMID favorites strong: ABOS CRSP NTLA PACB QDEL VCYT
- Biotech momentum ETFs: ARKG up 3.575, XBI up 1.13%.
- New long trades: CRBU ILMN
- MID Caps weak with IBB up only 0.98% to $127.96.
Update-3 JY 10…Small cap biotechs are looking good today with a lot of green. Large cap tech shifts to equal weight in broadening out of rally with energy, healthcare and industrials leading the way.
- XBI snapped back 2.91% to $84 handle,IBB up 1.83% to $126.65. ARKG up 5% to $34.85.
- Notable 5%+ movers: CRSP,CYRX ,IOVA,NTLA,NVAX,PACB,TDOC!! LBU up 8.75%.
- Large caps firm up:AMGN,NVS, GILD,VRTX
Update-2 JY 9. CPI this Wednesday… Biotech movers last week:
- Caribou Biosciences (CRBU) up. 22+ % on Pfizer equity deal.New long as a trade.
- Iovance Biotherapeutics (IOVA) up 6.3% on good volume.
- Roivant Sciences (ROIV) bullish pattern emerging this week with good volume on this speculative stock.
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Update-1 JY 7… Back to the FED and 2 more hikes? But earnings should clarify a few things with CPI and tech momentum
- S&P 4398,DOW 33,734, NAZ 13,660, Russell 200 recovers to 1864. Strength in energy stocks.
- Five days: IBB down 1.25% to $124.38, XBI down 1.02% to $81.78, XLV down 1.81% to $129.
- Large cap biopharmas have another bad day; a bit of strength in SMID life science.
- Biogen (BIIB) down 3.48% despite FDA approval on Alzheimer’s drug.
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Biotech Blues: Earning season ahead so stay balanced.
- The Huge Gains in Large Cap Technology Stocks has eclipsed Healthcare as a defensive allocation.
- Stock Pickers and Life Science Funds should outperform biotech ETFs in a Weak Sector.
- Life Science stocks lack momentum so be prepared for rebalancing and rotation shifts.
You’ve heard by now about the huge gains over six months for equities but alas not so much for biotech and even healthcare stocks. It’s a bifurcated market. The QQQ is up 38.73% YTD and the S&P is up 15.9 % YTD. The results for key biotech ETF sector performance has been very disappointing given the momentum of tech. Even the S&P is doing better in 2023. Biotech peaked in August 2021and is unlikely to regain momentum until Q4 2023. Moreover the XLV Healthcare SPDR Fund has been flat since Aug 2021. Keep in mind that many investors prefer healthcare because of its defensive nature but not over the last 2 years.
- iShares NASDAQ (IBB) Down 3.3% YTD, Up only 15.61 % over 5 years.
- SPDR S&P Biotech (XBI) Flat up 0.24% YTD, Down 12.6% over 5 years!.
- Healthcare SPDR (XLV) Down 2.3% YTD, Up 59% over 5 years.
in our recent posts we mentioned some of the underlying reasons for this underperformance like government intervention in drug pricing and FTC actions on M&A. Also rising healthcare costs of about 7%/yr are a major concern. We also published a “playbook” of sorts a way to look at subsectors in healthcare like tools, diagnostics and MedTech. The T.Rowe Price Health Sciences Fund (PRHSX) hold may of the top MedTech, tools and biopharma stocks so we should see gains here. But even the large cap biopharmas can be volatile like Regeneron (REGN) down 8.45% for the week because of the FDA delayed approval on a next generation Eylea drug and AstraZeneca (AZN) over the past week on mixed results for a lung cancer drug. And everybody knows about Eli Lilly (LLY) the hottest of the large caps UP 28% YTD due to its blockbuster diabetes and obesity drugs.
Small and Mid Cap -SMID Growth -in Life Science Stocks
The best trading opportunities for the Life Science/Biotechnology sector should be SMID stocks. We gave our last update for this portfolio on June 14 when weakness became apparent. especially with the XBI. We still hold many of these stocks and will publish a new portfolio sometime in the future. Best picks have been CRSP, GERN, PACB but volatility remains high.
Allocation: Health Care vs Generals
Healthcare currently represents about 13.3% of the S&P 500 compared to 28.14% for technology (XLK) so if you were underinvested in tech behemoths or “Magnificent Seven” stocks you were a gross underperformer. And the AI buzz helped the long term view for technology investing. So given the uncertainty with upcoming earnings and skew of performance one can make case for a balanced portfolio like long SPY until a trend becomes apparent.And of course cash is areal competitor to stocks offering 5% yield.
Discosure Long: ABT, LLY, MRK, PRHSX, IHI, IWM, UNH.And most large cap biopharmas below.
| Model | ||||||||||||
| PORTFOLIO | ||||||||||||
| 2020 | 2020 | 2020 | 2021 | 2022 | 2023 | 5 yr Total | ||||||
| Stock/ETF | Ticker | Price | Wgt | Price | Price | Price | Price | |||||
| 10/25 | % | 12/31 | % Perf | 12/31/21 | 12/31/22 | 6/30 | % Perf | %Perf | % | |||
| P | Month | YTD | ||||||||||
| iShares NAZ Bio | IBB* | 136 | 15 | 151.5 | 25.7 | 152.62 | 130.55 | 126.96 | 0.54 | -3.3 | 15.61 | |
| iShares Russell 2k | IWM | 163 | 10 | 196.4 | 18.3 | 222.45 | 174.36 | 187.27 | 7.77 | 7.4 | ||
| Merck* | MRK | 80 | 10 | 81.77 | -10 | 76.64 | 110.81 | 109.32 | -1.26 | -1.47 | ||
| United Health | UNH | 330 | 10 | 350.7 | 27.19 | 502 | 530.27 | 480.64 | -1.35 | -9.34 | ||
| SPDR S&P Bio | XBI | 117 | 15 | 140.8 | 48 | 111.96 | 83 | 83.2 | -0.86 | 0.24 | -12.6 | |
| Healthcare SPDR | XLV | 108 | 20 | 113.4 | 14.71 | 140.89 | 135.88 | 132.73 | 3.83 | -2.3 | 59 | |
| T.Rowe Hlth Sci | PRHSX | n/a | 5 | 99.65 | n/a | 104 | 89 | 90.77 | 2.9 | 1.06 | ||
| iShares U.S MedT | IHI | 50 | 10 | 54.83 | 65.85 | 52.57 | 56.46 | 6.71 | 7.4 | |||
| MedTech* | ABT | new | 5 | 123.5 | 127.46 | 109.83 | 109.02 | 6.88 | -0.7 | |||
| Tracking Comp | ||||||||||||
| ARK Genomic | ARKG | 93.26 | 61.24 | 28.23 | 34.09 | 7.78 | 20.76 | |||||
| Direx3X Bull | LABU | 7.66 | 5.92 | -5.13 | -16.27 | |||||||
| FIDO Biotech | FBIOX | 25.18 | 19.35 | 16.04 | 16.6 | 0.3 | 1.97 | |||||
| FiDO MEDtech | FSMEX | 76.15 | 83.18 | 61.58 | 65.42 | 5.02 | 6.24 | |||||
| DOW | DIA | 310 | 363.32 | 331.34 | 343.85 | 4.35 | 3.78 | |||||
| S&P 500 | SPY | 379 | 475 | 382.41 | 443.28 | 6.09 | 15.91 | 63.4 | ||||
| NASDAQ-100 | QQQ | 315 | 397.85 | 266.33 | 369.42 | 6.16 | 38.73 | 115.22 | ||||
| Technology SPDR | XLK | 128.93 | 161.97 | 124.44 | 173.86 | 5.83 | 39.71 | |||||
| Top Biopharmas | ||||||||||||
| 5 yr % Total | ||||||||||||
| Abbvie | ABBV | 161.64 | 134.73 | -2.34 | -16.63 | 45.42 | ||||||
| Astra Zeneca | AZN | 68 | 71.57 | -2.07 | 5.56 | 103.85 | ||||||
| Bristol Myers Sq | BMY | 71.05 | 63.95 | -0.76 | -11.12 | 15.56 | ||||||
| Gilead Sci | GILD | 85.39 | 77.07 | 0.17 | -10.23 | 8.79 | ||||||
| Eli Lilly | LLY | 447.71 | 468.98 | 9.2 | 28.19 | 449.61 | ||||||
| Merck | MRK | 110.95 | 115.39 | 4.51 | 4 | 99.22 | ||||||
| Pfizer | PFE | 51.24 | 36.68 | -3.52 | -28.42 | 6.56 | ||||||
| Regeneron | REGN | 725 | 718.54 | -2.31 | -0.41 | 108.28 | ||||||
| Vertex | VRTX | 288.78 | 351.91 | 8.76 | 21.86 | 197.05 | ||||||