1/22 …More Freefall on Friday

Yesterday’s freefall action felt a lot like 2001 when the market was trying to digest the 1999 bubble days.As we have been saying for many months once the momentum slowed stay away from speculative stocks without financial metrics. Many small cap growth stocks fall hard especially in biotech and when momentum turns down the sentiment evaporates. Tech shares were among the hardest hit with the QQQ down 6.88%.

We will post a recap on Monday but here is a quick look at the damage in biotech and stability of large cap healthcare for the week:

ABT down 2.95%, ABBV down 1.15%, ARKG down 8.71%, BMY down 1.64%,CRSP down 5.71%, IBB down 6.79%, MRNA down 23.84%, REGN up 0.86%, TMO down 3.42%,  UNH down 1.34%, VRTX up 0.66%. XBI down 8.23%. XLV down 3.64%.

There is a lot be learned from last week’s price action.


1/18..Update -1…Healthcare stocks hit in a broad sell-off

Higher bond yields(5 yr at 1.648%) and Goldman miss hit stocks today with NAZ down 2.60%. Tech and chip stocks in a rout. QQQ down 2.49% to October support at $370.55. XLV down a tiny bit 1.4% to December support at $132.19. IBB to new one year lows at $133.46. Our new buys can’t hold up: BMRN, EVH. Large cap biopharma winners: ABBV,GSK,LLY, MRK. Mid-cap biotechs trashed in a sea of red. COVID vaccine stocks down big: BNTX down13.66%, NVAX down 11.17%, MRNA down 8.85%.


JPMorgan Healthcare Conference 2022 Recap: A Good Week Despite Distractions

  • Large Cap Biopharmaceuticals offers value and is still the anchor for your diversified portfolio
  • Downtrend continues for speculative small caps as tracked by ARKG and XBI.
  • Rollling rotations by sector has distracted healthcare investors; Omicron narrative dominates globally.

The virtual JPMorgan Healthcare Conference may have been disappointing for many traders expecting big moves in their favorite biotech picks. Maybe because any buzz gets lost without live interactive exchange or people lose their focus working on-line with many distractions. The main distraction from biotech investing however may be a rotation to other hot sectors in the market like the so called cyclicals or value stocks trade.  This week commodities and energy were winners but financials have faltered on earnings disappointments.

As you can see from our summary below it was a good week for many stocks . But one major trend remains a big concern in biotech- small cap weakness. Speculative small and mid cap biotech stocks are hard to trade unless you are unusually diligent knowing future catalysts and the science behind the company. And the two most traded ETFs holding small cap momentum plays, ARKG down 4.92% and XBI down 2.43%,  show more damage this week.Clearly the Healthcare market has been moving away from risky momentum plays and toward large cap value.

And as we have posted large cap biopharma has been a value plus growth play albeit with the risk of of Medicare pricing legislation. Here is how our how our large cap focus stocks performed this week: ABBV up 0.73%, BMY up 3.34%, MRK up 1.34%, RHHBY down 2.86%, REGN up 1.91% and UNH up 2.20%. Our recent large cap biopharma pick Vertex Pharmaceuticals (VRTX) was up 5.5% this week helped by their pipeline presentation at JPM.

New Trades

We added Biomarin (BMRN) as a trade last week. Analysts like the stock with a “1.7” range and it is a well financed Company with EPS expected to improve. Catalyst seekers should also look at GlaxoSmthKline (GSK) with the impending deal to spin out its consumer healthcare products unit raising about $60B. GSK recently partnered with Vir Biotechnology (VIR) to produce COVID antibody drugs for patients with a high risk of hospitalization. We will track these two trades in future postings on any significant news.

We will update our Large Cap Biopharmaceuticals Metrics after all earnings announcements in early February.

The XLV an ETF and a general barometer of healthcare stocks was flattish down 0.21%. United Health (UNH) releases earnings on Wednesday.

Until we get to large cap earnings during the week of Jan 24 we can only follow technicals. We need a few deals to spark interest.  Large cap biopharma is flush with cash and small cap valuations are down so we have a nice backdrop for M&A. Omicron has hit some sectors like medical devices due a drop in procedures .  Some stocks to watch amidst the COVID omicron surge:

  • Gene Therapy CRSP, EDIT and NTLA.
  • Coronavirus plays lag: COVID diagnostics and mRNA vaccines.
  • Medical devices  or Medtech: continues to languish as tracked by IHI down 1% over past week. Quality names are ABT, BAX, BDX and TMO.

Here is the updated model healthcare portfolio.

2020 2020 2020 2021 2022
Stock/ETF Ticker Price Wgt Price Price 1 year Price Week
10/25 % 12/31 % Perf 12/31/21 % Perf 1/14/22 %Perf
iShares NAZ Bio IBB 136 25 151.5 25.7 152.62 0.75 138.95 0.66
iShares Russell 2k IWM 163 10 196.4 18.3 222.45 13.46 214.31 -0.81
Merck* MRK 80 5 81.77 -10 76.64 -1.81 81.38 1.34
United Health UNH 330 15 350.7 27.19 502 43.84 468.69 2.2
SPDR S&P Bio XBI 117 5 140.8 48 111.96 -20.5 100.49 -2.43
Healthcare SPDR XLV 108 25 113.4 14.71 140.89 24.73 134 -0.21
T.Rowe Hlth Sci PRHSX 99.65 104 5.29 117.14 -9.44 ytd
iShares U.S MedT IHI 50 15 54.83 65.85 21.4 61.45 -1.17
Tracking Comp
ARK Genomic ARKG 93.26 61.24 -33 51.58 -4.92
FIDO Biotech FBIOX 25.18 19.35 -23 17/09 -11.68 ytd
FIDO Medtech FSMEX 76.15 83.18 14.71 74.15 -10.86 ytd
DOW DIA 310 363.3 19.31 359 -0.87
S&P 500 SPY 379 475 27.7 464.72 -0.29
NASDAQ-100 QQQ 315 397.85 28 380 0

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