Momentum Continues
5/29…We will update the coronavirus trade tomorrow so sign up! Today the market recovered (NAZ up 1.4%) after Trump’s rant against China. With no new news like tariffs it’s back to “don’t fight the tape, don’t fight the FED”. Its ASCO time so this should be positive for biopharma stocks and you can see it today in large caps with a green screen: ALXN GILD REGN VRTX etc.IBB up 1.88 %. Healthcare was a positive sector with the XLV up over 1% close to $103 handle.
Coronavirus stocks bounced back with some surprising big gains off week’s lows:INO MRNA TDOC VIR. Update tomorrow.
Gene therapy stocks were mixed but ALLO BLUE CRSP saw gains. Mid-caps picked up ARNA LGND NBIX SGEN etc.
===============================
5/27…The coronavirus bullish trade is officially over today . See MRNA down13%, TDOC down 6% and QDEL down 5%.
5/26 FADE at close as S&P Drops to 2991 level up 1.23%. Some rotation into energy financials and industrials.
So today you were a trader and market participants are not convinced that coronavirus vaccine news can spur the market much higher. Novavax (NVAX) catalyzed the market early in the day, reached a high of $54.50 then closed at $48.24. The news was that Novavax began Phase I/II human trials on their COVID-19 vaccine. But keep mind that there are about 12 coronavirus vaccines in development from major players all with adequate financing near term. So COVID vaccine news may continue to move the market but major milestones may not be coming until September. Coronavirus stocks were weak today with notables: MRNA down 16% to $57.71, Regeneron (REGN) down 4.33% to $545 and TDOC down 5.57% to $164.The XBI hit $108 level then faded to $103.55.
======================
Biotech Bull Market: Are you a Trader or an Investor?
- Case study for long term investing: Regeneron and Vertex.
- XBI for momentum traders.
- Three tips for managing your portfolio.
You don’t need expensive technical software or scientific expertise to know there is a bull market in biotech stocks. We have focused on coronavirus stocks over the past 3 months and as you can see from the charts we published last week there are many big winners in 2020.
Despite the economic pains of the pandemic, investors are driven to life science companies in the news with potential solutions to the COVID pandemic. The breakthrough potential for a COVID vaccine or a new viral diagnostic product has been the focus of the market. And with the FED providing ample liquidity, Institutional investors are funding companies of all sizes while traders take advantage of huge daily moves.
- Since the mid-March 2020 3/23 bottom biotech has outperformed the S&P 500 (down 8.5%YTD) with the IBB up 10.6% YTD and the more volatile equal weighted XBI up 11.5% YTD at $106.
- The NASDAQ-100 (QQQ) index is up 7.8% YTD.
- And it pays to have some gold in your portfolio with the GDX up 21.4 % YTD.
Case Study of Two Large Caps
With the huge momentum and volatility of many biotech stocks on a daily basis you need to decide is it a TRADE or a Long Term position? The best example I can give you is Regeneron (REGN) recently in 2020 a top performer up 52 % YTD to $570 because of its revenue growth, R&D strength and broad pipeline of antibody therapies including COVID-19. REGN was an easy trade in 2010 at $26 when it broke through and doubled to $55, based on its potential with a breakthrough age related macular degeneration drug EYELEA. Three years later it hit its current level $557 before plummeting to the $307 level n 10/1/19. Regeneron is a case study for long term biotechnology investing which is not easy to do with REGN weakness in recent years. We have come to that point with REGN again–a two month double top at the $570 handle.
TEN YEAR CHARTS for Regeneron and Vertex.
Many investors use financial and technical metrics from the Investor’s Business Daily (IBD 50) to build their portfolios. A quick review of life science stocks in the IBD 50 shows several companies well known to us: VRTX at #5, BMY #17, REGN # 48 and NBIX #50. We covered Vertex in the past most notably in 2017 when the stock broke out at $108 now at $285, another good example of long term investing. There are only 4 major biotechs in the IBD 50 and this is a bullish signal because the sector is well positioned for growth and timeliness.
A Traders Favorite –XBI
Look at the recent momentum of the XBI .Over 3 years it favors traders because long term holders are stuck at 2018 levels.
Are you a trader or Investor? Trading comes easy but long term investing is the key to wealth creation. Some key points to consider:
- If you are a trader this momentum market is in your favor even with micro-caps. My current short term trades that may interest you are: ALXN PACB VIR and XNCR. I have sold excellent long term stocks too soon over the years: ILMN INCY SGEN. Amarin (AMRN) was a great trade but a terrible long term hold.
- Core holdings are large and mid-cap positions that we favor because of revenue growth trends, M&A potential or clinical milestones: ABBV, TDOC, We have done well trading gene therapy stocks but we should find a few and hold them longer; CRSP EDIT NTLA.
- Long term positions should rarely be traded or rebalanced because of growth +dividends during secular bull market conditions. Major ETFS like IBB and life science funds like FBIOX and PRHSX are good long term positions . See other funds and ETFs we have covered in the past. We also hold BMY GILD MRK and RHHBY long term. Our two best 10 year holdings are BDX and IDXX but with both weak now should I sell?