Healthcare Markets Weekly Summary: SMID Biotechs Lagging…Update-3…SMID Biotech Rally Underway

MAY 1..3:00P EDT…XBI up over 5 %, Spec biotech rally! Details later.

April 30 …Sell off at close -FED jitters plus yieldsup not a good combo. Labor costs rise,US consumer sentiment drops ,worst month since 9/22. NAZ and Russell down over 2%, S&P down 1.57%. IS it time for Healthcare stocks to shine? XLV flat today at $140.33 holding near recent bottom.

• Still have high hopes for speculative biotech with the XBI at $84.62 down 1.05%.
• SMID weighted IBB down 1.13% at $126.92.
• Large caps mixed but LLY up 5.95% at $781.10 on $2B sales of GLP-1 drugs Mounjaro and Zepbound. , Lilly raises guidance Q1 EPS beats up 66% to $2.48 , pipeline process for major drugs for sleep apnea, Crohn’s Disease and Cardiovascular.

Healthcare and Biotech Markets Weekly Summary April 27

• If you have to own healthcare stocks and are not an active trader pick any four funds below as they should outperform the XLV.
• Large cap biopharmas are mixed in 2024 but core portfolio can own: ABBV, AZN, LLY, MRK, REGN, VRTX. Speculative buy is PFE with a yield of 6.61%.
• Look for new opportunities in MedTech.

Healthcare stocks lagged again this week with the XLV up 0.73%, 2.63YTD, eclipsed by Technology and the huge investments in AI. Capital spending boomed with  major players  Google and Microsoft and chip stocks came back. We can eventually see AI applications in drug discovery and healthcare data management  but for now investors are thrilled by “Magnificent Seven” stocks and many of them came back last  week.The broader market recovered as well after 3 consecutive weeks of losses with the S&P 500 up 2.7% with a YTD gain of 6.9%. The QQQ was up 3.94% last week and 5.25% YTD. The XLK technology SPDR was up 3.79% and 3.82% YTD. Powering the train forward  was the semiconductor (SMH) 9.25% and 24.46% YTD. The chips took a tumble in April down 3.26%. Consumer Discretionary stocks came back up 3.5%in as robust  economy maintained strength.

Here is last week’s report with some earnings updates.

United Health (UNH) was down 1.15% but off earlier month lows of $437.03. UNH has carried the healthcare sector for 5 years up 109%, but the data breach at its Change Healthcare subsidiary has given the Company a temporary setback. Assuming the Company can prevent future cybersecurity attacks in the future its growth prospects are excellent. The FWD PE is 15.97 and with Revs of $379B and a revenue and earnings growth rate of 10%+ it should be a core position in every healthcare portfolio. Also there is upside potential  notably from administrative efficiency but from use of AI in its massive database of prescription and medical records.

Another big earnings week is coming up for more heavyweight companies and biopharmas Lilly and Pfizer.  Biotech stocks tried to rally with the IBB up 1.42% but still down 6.89% YTD. We should get help for life science stocks this quarter from scientific meetings like ASHG and ASCO.so looking for boost from clinical data. Two major “tools and diagnostic “companies reported last week Danaher (DHR) and ThermoFisher (TMO) with respective gains of 5.7% and 5.9%, YTD 6.59% and  8.07% These companies are core holdings for life science R&D and another way to play the sector is through two major FUNDS: Fidelity Select Medical Technology and Devices up 2.66%,(FSMEX) and T.Rowe Price Health Sciences (PRHSX) up 2.15% YTD. With these two funds you will be covered on strength for DHR,TMO and UNH as well as several major biopharmaceuticals. So until we gt through earnings season and specific stock picks we prefer  funds over major life science ETFs.

MedTech got a slight boost last week with the IHI up 2.15% , up 2.89% YTD. Our limited  holdings that released earnings were mixed: ABT flat at $107.53, BSX up 8.67% at $73.17, ISRG up 2.45%.  Among earnings to watch in coming days are BDX, GEHC, HOLX, SYK

Here is recent review we did of top Life Science  Funds in early February 2024. Two of the top funds at that time were  Blackrock Health Sciences (SHSAX)  up 3.85% YTD and Janus Henderson (JFNAX) up 2.8% YTD.

For more speculative positioning in SMID stocks we like the XBI up 0.8% for the week and down 6.5% YTD. This ETF is quite volatile hitting $103.08 in early March with a low of $81.77 last week. It is equal wait usually holding no more ~1.2 % weighting in an individual stock with frequent rebalancing. Its last big year was in 2021 with highs $166.78 and lows of $64.12 in 2023.

Next week we will update our trading list of SMID stocks including some new MID cap picks.

Large Cap Biopharmaceuticals stocks were more volatile than expected. If you owned LLY over the past 2-3 years you are ahead in your playbook.  But you have to monitor news and upgrades for these stocks. One the long term great management wins and the best over the long term has been at Abbvie, Lilly, Merck, and Regeneron.

• Winners for the week AZN,MRK.
• Up YTD:  ABBV, AZN ,LLY, MRK.
• Losers YTD : BMY,GILD, PFE,VRTX.