A Place to Hide from Volatility

Today was not as bad as early futures and European markets would portend. The S&P cut its losses to 0.74% and the NASDAQ was down only 0.26%. But as we recommended last month the healthcare sector looks good for relative safety. Drug stocks that pay dividends and large cap biotechs were standouts.As if they followed the “buy dividends” cliche from the talking heads on CNBC big cap drugs were up about 1%: BristolMyers (BMY), Johnson and Johnson (JNJ), and Pfizer (PFE). Abbott(ABT ) was up 0.5% and Amgen(AMGN) up 0.75%. Why wait for the crsis to ease and growth stocks to recover when you can get a dividend and slow growth from the healthcare sector. Even the broad-based ETF XLV is up 3.27% YTD. The biotech ETF IBB is flat for the year in contrast to the S&P down 7%.

Many of our favorite biotech stocks roared ahead 5% or more: Alexion (ALXN), Regeneron (REGN), Optimer (OPTR) , and Seattle Genetics (SGEN). Our mid-cap biopharmaceutical index of 33 stocks was up 1%. This is quite a positive development considering that in August the mid cap group was all red with losses of 4-5% a day.

This Week’s Barrons on p 17 had a 2011 Outlook from 15 buy and sell side strategists with predictions of a fourth quarter rally. Five strategists had Year end targets of 1400 for the S&P. Only two were bearish with flat forecasts from present values. The curious forecast bucking the trend was a down forecast for the Ten Year Treasury with Yields well above 2%. On European crisis days money flows to treasuries.

In other news one of our diagnostic picks GenProbe (GPRO $57.67) was up over 2% on a potential change in the CA tax law change that would end a tax break for companies based outside the state. GenProbe has most of their employees in CA.

Gold could not hold its highs over $1900 finishing at $1873.

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