Trump Biotech Rally-Have a Balanced Portfolio

Everybody who invests in biotech knows there has been a Trump biotech rally since his election as you can see from the chart and data below. Many opinions and analysis were given for the rally.Some pundits say it is because the end of the grueling election has removed uncertainty while others might say it is because the cloud of drug pricing rhetoric has been cleared for now. Most stocks were boosted from this rally making up ground from the freefall that began on October 25 and did not really recover until November 8 when Trump won the election. Since that day the more speculative, smaller cap XBI has outperformed the IBB by six percentage points. We recommended that investors who wanted to overweight biotech go with XBI in addition to IBB. But the XBI is much more speculative and volatile .The XBI up 3.54% YTD has also outperformed the IBB still down 13.69% YTD. In our portfolio large caps have lackluster performance because of disappointing clinical trials (BMY) and lackluster growth (AMGN).

Despite a bear market and a vicious sell-off many smaller cap biotechs were soaring as of 11/2. Stocks like these  pretty much track the IWM  iShares Russell 2000 Index which is up 15% YTD.

Here are some trends to consider from recent data:

  • Large cap biotechs (AMGN,BMY,GILD) will probably need to make major acquisitions if they want to boost revenue growth rates which are forecasted at 3.1%, 3.8% and (6.3%) respectively for 2017. They have made successful acquisitions in the past. ABBV growth rates are forecasted at 10.10%
  • Small and mid caps give an investor more upside from news and less downside from an earnings miss assuming the bear market continues to recover. So risk is on for biotech speculation.
  • The IBB and the XBI once again show they can outperform stock picking and mutual funds because of quick rebalancing and diverse portfolios. The Fidelity Select Biotechnology Portfolio still trails ETFs down 15.9% YTD but has caught up recently.

This is not a new bull market rather a recovery from a bear market that began in January 2016 when the IBB was 340. The IBB needs to break 300 just to top recent September highs.

XBI SPDR S&P Biotech ETF daily Stock Chart

Rayno Biopharmaceutical Portfolio

Ticker Date Price Price Price 30 day Total
Started Started 9/28 11/15 Perf% Perf
ABBV 2/3/16 56.49 64.22 62.87 4.49 11.3
AMGN 9/12/16 172 169.7 147 -9.17 -14.5
BLUE 2/3/16 43.75 69.11 63.6 1.13 44
BMY 2/16/16 61 55.09 56.69 13.88 -7.7
FMI 7/5/16 20.4 23.84 22.35 1.13 9.8
GILD 2/3/16 85.8 79 76.39 4.95 -10.9
RHHBY 4/4/16 30.36 31.6 29.05 -2.16 -4.3
XBI 64.48 67.71 13.68
IBB 6/29/16 250 295 291.33 9.33 16.5
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