9/12/22...Bristol-Myers (BMY) up 5% on FDA approval of psoriasis drug.Large cap biopharmas rally: AZN, GILD, MRK, etc. Mid- caps green esp MDGL,MRTX.

9/9/22… Nice broad rally day with the NASDAQ up 2.14%.The Russel small cap(IWM)  was strong up almost 2%. Tech stocks (XLK) came back  up almost 2%.The rally today.caught many traders by surprise given the tough bearish rhetoric. Is it a pre-CPI rally expecting lower inflation data next week or just traders looking for bargains?

The IBB was up 1.12% and the XBI up 0.67% keeping the biotech momentum going. Large cap biopharmas  were green with the following stocks near 52 week highs; LLY, REGN, VRTX . Momentum stocks and ETFs were up: ARKG, IONS,NTLA,RGEN,TDOC etc.

Moves among our small/mid cap pick list were:  EVH, CRSP, CYRX, and  QDEL.up 4% to 86.

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9/8/22 2P EDT Biopharmaceutical movers up: ABBV up 1%, BIIB up 2.85%, REGN up 19%, VRTX up 1.5%. Even the IBB is up 2.85%

The more speculative XBI was also up 2.59% to  the $86 handle.

Moderna(MRNA) recovered as their R&D show inspired confidence in their mRNA technology and product portfolio.

Regeneron clinical trials shows a “retooled’ Eyelea could help its competitive position.

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Healthcare Sector Still Looks Good Despite Losses Over Past 30 Days

  • Geopolitical Turmoil and FED Fears curb buyers with knee-jerk selling and sector rotation.
  • Large cap Biopharma with dividends still offer good value.
  • Small Cap Picks sell-off but expect a Q4 rally.

The summer rally is over it’s a holiday weekend with low trading volume and bad news is pervasive..A decent jobs report on Friday brought in buyers in early hours until Russia intervened with a Nord Stream suspension of natural gas to Germany. Just another risk-off day where raising cash is the new play. So don’t fight the FED eh?

Healthcare stocks are normally a defensive weighting in your portfolio but in this market who knows? Still the XLV  down 11 % YTD is  better than the DOW down over 13% and the S&P down over 17%. Biotech stocks were beginning to shown nice gains but speculative interest waned in mid-August as they sold off. The XBI sold off but is still up 3% over 30 days. We are still expecting a Q4 rally In speculative biotech and the XBI if it can hold the $80 level.

Our small/mid cap picks sold off over one month with the IWM down 3.7%  but CCXI, EVH and MRTX still look good. Modern (MRNA) will need help from their R&D update this Thursday.

Large Cap Biopharmaceuticals Offer Good Value.

We have favored  large cap biopharma over the years because of new product potential, dividends and relative safety. We recently published a review . Lately with market volatility rotation has been a factor with a shift to treasury bonds and energy with rising rates. Many bearish analysts have recently focused on valuations of large cap growth stocks saying with short term treasuries  yielding over 3% there is a good alternative to stocks. I might add that the IBB has underpeforrmed down over 20% so not a good biotech trading option for the short term. The XLE Energy SPDR ETF by contrast is up 44% YTD!

So maybe we need to look at biopharma valuations under the pall of higher rates and government intervention on pricing. But Price to Sales ratios of about 5 and Forward PEs under 20 are not out of line with the S&P PE of 21.

11/6/22…Bear Market Metrics Two terms have crept into the lingo of market pundits: PE Compression and Free Cash Flow yields. One continuing bear market analysis narrative says with slower growth and a FED induced recession coming a market PE above 20 is unsustainable. A good stock to further analyze is the biggest and one of the most widely held stocks in healthcare United Health (UNH). UNH has a P to free Cash Flow of 33 and a PEG of 1.88 not cheap but good value considering it is still a growth stock.

Model
PORTFOLIO
2020 2020 2020 2021 2022
Stock/ETF Ticker Price Wgt Price Price 1 year Price YTD 30d
10/25 % 12/31 % Perf 12/31/21 % Perf 9/3/22 %Perf
%Perf
iShares NAZ Bio IBB* 136 15 151.5 25.7 152.62 -31.14 121.19 (20.6) -1.17
iShares Russell 2k IWM 163 10 196.4 18.3 222.45 -20.36 180 -19 -3.7
Merck* MRK 80 5 81.77 -10 76.64 11.81 86.23 12.51 -1.58
United Health UNH 330 15 350.7 27.19 502 21.86 516.35 2.83 -3.57
SPDR S&P Bio XBI 117 10 140.8 48 111.96 -38.67 83.73 -25.21 3.4
Healthcare SPDR XLV 108 25 113.4 14.71 140.89 -8.57 125 -11.29 -4.55
T.Rowe Hlth Sci PRHSX n/a 10 99.65 n/a 104 -25.4 87.39 -16 -2.73
iShares U.S MedT IHI 50 10 54.83 65.85 -24.67 50.23 -23.72 -6.79
Tracking Comp COMP
ARK Genomic ARKG 93.26 61.24 -60.55 34.67 -43.39 -6.83
FIDO Biotech FBIOX 25.18 19.35 -33.57 15.91 -17.78 5.85
FIDO MEDtech FSMEX 76.15 83.18 -33.96 58.78 -29.33 -7.26
DOW DIA 310 363.32 -13.58 313.76 -13.64 -3.17
S&P 500 SPY 379 475 -13.45 392.24 -17.42 -3.88
NASDAQ-100 QQQ 315 397.85 -22.41 295.17 -25.81 -6.1
Top Biopharmas
Abbvie ABBV 21.66 136.28 0.65 -2.93
Bristol Myers Sq BMY 3.77 68.61 10 -6.37
Eli Lilly LLY 16 301.33 9.09 -5.89
Merck MRK 11.8 86.23 12.51 -1.58
Regeneron REGN -14 580.62 -8 0.98
Vertex VRTX 41 282 27.98 ,2.62

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