Update-3 April 5 12:45p EDT…Biotech sector lags strong market  today as S&P and DOW hit new highs as of mid-day trading.NASDAQ up 1.49%! It looks like re-opening stocks are favored over long-term plays in biopharma that have few catalysts.Tech is strong as XLK is up 2%.

  • ARKG up 0.6%, VIR down 4.44%, XBI up 0.22%.
  • Large caps holding. IBB flat at $151.
  • Diagnostics strength: QDEL, NVTA, TMO, VCYT


Update-2 Trading XBI long under $140 expecting NASDAQ and biotech rally next week. Look for strength in small caps as well (IWM). Look for upside moves in medical devices (IHE) up 2.5% last week. We own ABT, GKOS , HOLX; and FSMEX.

Update-1 March 31 3p ET  Lotsa green MO shoots appearing.

Our indicators are more positive today with the ARKG, TDOC, VIR, XBI up and most vaccine stocks up BNTX, NVAX, MRNA; IBB Up 2.71%. Nibble on some XBI; watch for re-balancing with longs next week.


Healthcare Stocks to Own Until Momentum Returns

Small cap momentum trades are fading-the XBI is a key bellwether.

Large Cap Dividend stocks can anchor your portfolio.

Rolling rotation require more portfolio re-balancing.

Today’s trading was inhibited by the Archegos Capital Management block trades and multi$$B margin call as investors were reminded about previous leveraged debacles.There is likely to be SEC action as it appears that the block trades were not disclosed and related parties not known to all the banks who loaned Archegos the funds.Global banks are expected to incur big losses

Major averages teetered around the flat line  with continued weakness in the NASDAQ. A major concern is the rapid rise in the 10 Year Yield hitting 1.72% today. The IBB was down 1.27% to a triple bottom chart at the $147 handle. As expected the the XBI was weak down 2.78% to the $129 level now flat for 2021.

As we noted in our previous posts we need to reconsider biotech trades with all the volatility. Technicals still matter most but some other issues  have arisen. You probably read recently about the recurring issue of drug pricing reform beginning with the ability of Medicare to negotiate prices directly with manufacturers . Then comes the concern by some industry analysts that the FDA may be more cautious on drug approvals.There is no announced policy shift yet but investors need to be aware of this issue and potential stock downgrades.

Over the past week there was a major downdraft in the biotech sector of healthcare despite major indices in the market doing well. The XBI was down 9.49% to $133 last week  and the larger cap weighted IBB was down 5.55%. That weakness continued today. You have seen the volatility of the coronavirus momentum plays with all major vaccine stocks – BNTX, CVAC, MRNA, NVAX-well off their 52 week highs. “Pure Play” diagnostic stocks were initially great trades- CODX, OSUR, QDEL- but because of valuation or changes in the market needs have come down to lower quartile levels over 52 weeks. One of our small cap diagnostic picks (pre-COVID) Genmark Diagnostics (GNMK) was a “four-bagger” because of its acquisition by Roche, who valued its molecular diagnostics platform and menu. Our other picks in diagnostics are large cap leader Abbott Laboratories (ABT) and mid cap Hologic (HOLX) both companies with good molecular diagnostic platforms but with a broader portfolio of other medical devices.

Long term HOLDs are ABT, HOLX and PFE.

We also favor large cap biopharmaceuticals dividend plays ABBV, BMY, GILD, MRK . All have favorable technicals and upside from diverse pipelines. Another good healthcare stock we picked last October is United Health (UNH). Here has been strong buying and a 1.9 recommendation. The P/S is 1.37 and the FWD PE is 18. Earnings are scheduled for April 15.

Until the moment shift to smaller caps tracked by the IWM and XBI we would hold off on aggressive trading especially during a short holiday week.


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