Update-3 July 5 11a EDT Rally in speculative biotech stocks with XBI up1.85% to $77 handle. Early movers: AGEN, CRSP, CYRX, DNA, QDEL, ROIV, VCYT all on our focus list. Added to Moderna (MRNA) at $153. Market indices in red on recession fears with S%P 500 down 1.9% NAZDAQ coming back down only 0.74%.
Update-2 July 1 ..3p EDT Green is a new color for July? Have all the sellers gone to the beach? I can’t say how we will close but bids are coming in. The amount of bearish ink on the biotech sector would choke a monkey like today in the WSJ ,” Pharma Giants won’t Bail OUT Battered Biotech.”
For the quarter the QQQ was hit hard down 22% but health care kept pace with the soaring (at times) energy sector down only about 6%.
Small Cap Biotech Action
But the XBI is up from the bottom holding the mid 70s this week . And some of my recent speculative trades are in the money this week:AGEN, CCXI, CYRX, MRTX, ROIV, Even CRSP is up today and I still like MRNA and QDEL as trades. Evolent Health (EVH) is a long term position and has recovered to $31. July is usually a good month so maybe we avoid the “macro monster”.
Update -1 Je 28 A major sell-off day with the NASDAQ down 2.98%, IBB of 2.3% and the volatile XBI down 3.57% Energy stocks rallied with the XLE up 2.7% to $75 handle on weak volume. The narrative has shifted to a recession weaker economy scenario.The XLV lost 1.74%. A sobering reminder that the market is trend-less except for these brief rallies even though a lot of damage to PE multiples has been done in 2022.
Even large cap biopharma stocks were hit with losses with ABBV, GILD, REGN and GSK holding up better. UNH was up 0.55%. Small cap focus stocks were down mirroring NASDAQ losses. with gains only with CYRX and ROIV.
The IWM was down 1.88%. Need to take it day by day in smaller caps or just trade it.
Healthcare Stocks Lead the Way Up Even Boosting Small Cap Biotech
- Amazing Week June 21-24, with big gains across biotech and healthcare shares.
- Can small caps gain momentum despite macro headwinds?
- Caution-Earnings lie ahead with potential for cuts and downgrades.
Call it a bear market rally or bargain hunting but it was the best week in a long time for biotech shares. M&A has always been a catalyst for the sector and it could be that the major acquisition of Seagen (SGEN) by Merck for its antibody drug conjugate (ADC) platform is one of the catalysts for sector strength. The potential deal for Seagen is in the news but has not been confirmed. SGEN stocks is already up over 34% in one month at $179/sh. with a market cap of over $30B. Merck shares were up 9.71% for the week and has been one of our top picks.
Large cap biopharma stocks soared this week not only because of their defensive nature but offering dividends and growth. Our favorite large caps have been: ABBV, BMY, MRK, REGN and VRTX. We have traded LLY despite its high valuation and we are currently long. Regeneron (REGN) shares recently took a hit because of the acquisition Sanofi’s stake in Libtayo. Our portfolio strategy has been to overweight large cap biopharma, United Health (UNH) with small and mid cap trades along the way in 2022. We offered some guidance in our Model Healthcare Portfolio which has done well in a volatile bear market in 2022. Healthcare stocks led the market over the past week with the XLV up 7.7% but still down 8.3% YTD. Commodity stocks took a big hit with the Bloomberg Commodity Index down 4.31% led by copper down 6.41%. Energy stocks were also down 1.55%.
The XBI had an amazing week up 20.46% to $77 with a good trend up 14.33% for the month despite being down 31% YTD. However gene therapy shares continue weak despite good gains for the week in Intellia Therapeutics (NTLA) up 28.59%.
Small cap biotechnology stocks have always been good trades long and short for specialists in the industry. Over this past week small caps show momentum which could indicate better times ahead. iI the Company has ample cash and a good pipeline you are getting good relative value. Cash is critical because the markets are not good for raising money for speculative biotechs companies. So this is still a traders’ market where technicals matter most. Here are our more focused small cap trades for 2022 all big movers this week.But they are extremely volatile. We will detail them on a new matrix but for now all have support from major biotech analysts :
Small cap focus list: CCXI, CYRX, EVH, DNA, MDGL, MRTX, TDOC, VCYT,