Update-1 AAPL ignited rally? Either by oversold conditions or good earnings by AAPL and MSFT we have lift -off from the bottom. If your speculative biotech stocks did not go up today you may want to dump it. Our mid-cap focus list saw nice gains except for CRSP. ARKG was up 4.52% and the XBI was up 3.72%.but those ETFs are for traders only. We will summarize the week’s action over the weekend but considering that the XBI is at $88.72, down 41% over one year from the momentum driven high of $151.64.
Our top picks have been large cap biopharma stocks: ABBV, BMY and VRTX and long term holds for large cap biopharma stocks: GILD, PFE, RHHBY, UNH is a core healthcare holding as is REGN but we lightened up on Regeneron.
Growth Stocks in biotech roared back today with even vaccine stocks BNTX and MRNA with big gains. And it was a green screen among-cap biopharmas: ALNY, BHVN, BPMC, BMRN, NBIX,SRPT and SGEN all up nicely. Our recent new buy Evolent Health (EVH) was up 4.54% to $23.28.
The QQQs might be a better indicator of risk-on appetite up over 3% today.
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Update-2a…1/26..Another roller coaster day as skittish market is still sensitive to FED but more on balance sheet reduction. Any hopes for dovish FED dashed?
Update-2 1/26 rally day, XBI off bottom only for traders as of mid-day trading:
1:13 P EST...Gene therapy movers up: EDIT 5.65%, CRSP 4.62%, NTLA 6.1%.
1/26…2:05P EST Mid-cap rally with green screen, big movers: ASND, BHVN, BMPC, CRSP, IONS, MRNA, SRPT, XNCR
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Update-1 1/25…Stocks Mixed off bottom in extreme volatile trading; MSFT earnings good after guidance. Energy stocks rule.
- Trades- sold half of REGN last week -made a good trade because of antibody Rx news today off 2.9%; bought more PFE at $52, bought more EVH at $23.
- XBI trying to bottom in low 90s, oversold. CRSP up 3.78%.
- My best large caps holding up over correction: ABBV, BMY, GILD, MRK, PFE, VRTX.
- Vaccines up BNTX , MRNA down.
- IHI a medtech ETF down 1.95% to $57.85.
- JNJ up 2.86% on earnings and vaccine revenues, Guidance good with EPS growth 9.2%.
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What’s Next for Biotech Stocks?
- We are in a bear market for speculative biotech stocks.
- Large cap biopharma holdings outperform.
- Volatility remains high.
You know by now it has been a brutal 2022 for the market and even worse for small and mid-cap biotech stocks. We knew stocks would be volatile as we saw it in Q4 2021 and even Q1 when the speculation was rampant and the XBI hit new highs! I remember back in the day when we did detailed analysis of emerging biotech stocks sifting through product pipelines, comparing market caps, balance sheets and savoring analysts reports. Now it appears you can get by on technical analysis because the sector move as a group depending on sentiment and institutional appetite. One thing you can do if you are buying risky stocks- make sure they have 2 yrs of cash to fund their R&D pipeline.
Here are some results by the numbers:
- The XBI hit a 12 month low of $90 on Friday, but over two years including 2020 the XBI hit a low of $62.94 on 3/20/20. January 2020 wast the beginning of the COVID related bull run in biotech that ended in February 2021. t was driven largely by breakthroughs in COVID diagnostics and mRNA vaccines but then spilled over to speculative biotech stocks.
- You can look at the XBI as a bull/bear sentiment indicator for biotech. Have look at the bull run from May 2014 through July 2015. Another bull run was from February 2016 through September 2018 before a very choppy 2019.
- It would be beyond the scope of this report to attribute events or trends that drive biotech stocks except to say technicals can track the underlying sentiment. I have written in past that biotech always comes back after excesses in the market because of the sheer amount of life science R&D and size of medical market opportunities.
- However if we break through $80 a 2 year low what does it mean? Too many companies and too much investment that will fail? A lot of money poured into biotech in 2021 so we need to see a return from new products and revenue. We will update you on an IPO number but as of AUG 2021 71 IPOs raised $12.7B in 2021. Many of these IPO companies had robust funding from VCs in the previous five years.
Note that the IBB is much less volatile from 2016 through early 2020 making the IBB harder to make big gains but in a bad year not so safe. Because of its large cap weighting its always buffeted by legislative, disease and surgical trends,
We will continue to post next week which looms critical as technical levels teeter in a bear market for speculative biotech stocks. But we may be in for more risk from macro issues of higher interest rates and global conflicts.
What to look for: stocks that rally early next week perceived as oversold and a bottoming of the XBI. Will the rotation into value out of growth continue? Can gene editing stocks find buyers?
We will track our healthcare portfolio and current strategy which focuses on large cap Biopharmaceutical stocks with dividends, strong balance sheets and revenue growth. Also we should also look for a recovery in medical procedures as tracked by a US Medical devices. ETF (IHI). For starters we need a big rally by Tuesday’s close.