As Market Rally Broadens, Biotech and Healthcare Stocks are Looking Better…Update-3 Momentum is Selective

Update-3   9/11..Selective SMID biotechs ran up today along with the mid day reversal in the tech stocks showing speculative interest remains in the market. Watch ARKG and XBI for strength. Some big movers this week: ADPT,CRBU CRMD,DNLI, NTRA, ROIV,VCYT. But SUPN was down 7% on weak sales for a major product.

Update-2…SEP 7… “Are looking better?” maybe not as even healthcare stocks could  not hold up from the vicious selling but I’ll wait for next week to sort it out . The XLV was down 1.39% for the week not too bad considering the QQQ was down 4.67% and the XLK was down 6.22%!  Well take a look at Large Cap biopharmas over the weekend since the bets performers were down while the laggards held like PFE down only 0.56%, GILD down 0.92%. Small caps as you might expect were down with the XBI down 4.35% to $96.52.

Update-1 SEP 5,,,A Risk- Off day.even large cap biopharmas took a hit with weaker stocks gaining like MRK and PFE. Quidel (QDEL) up 10% to $44 handle on activist news.

• Large cap biopharmaceuticals are top performing stocks because of new blockbuster products and dividends.
• The healthcare sector performance overall is improving but the S&P 500 (SPY) is still a leader up more than 18%.
• Healthcare stocks made huge moves off the August bottom MedTech (IHI) was up over 7%,healthcare (XLV) up 4.67%.

The market narrative lately from most analysts is that the market rally can continue to new highs by year-end but of course we have to make it through the notoriously rocky two months ahead . Then comes the flak from the election that can create more volatility. The “MAG Seven” and semiconductor stocks (SMH up 39.2% YTD!) have dominated through July but lately the Mega techs have been losing momentum. For example the XLK is still riding high but many other subsectors as Financials, Industrials and Materials  are catching up. Similarly the MAG 7 stocks hit their high in early JULY and are now consolidating as the market rotates to other sectors. Moreover you have to choose among the MAG 7 as the performance becomes disparate. GOOGL lagging AAPL leading. One ETF that holds MAG 7 stocks is the Roundhill Magnificent Seven ETF (MAGS) trading at $44.64 still up 33.45% YTD but up only 2.74% over the past month. The overall sector performance should be tracked weekly to better understand  the composition of your portfolio. For example the Inveseco Equal Weight S&P 500 (RSP) is up just 11.45% YTD and 2.97% over the past month. This is one comparison to show market performance diluting the impact of MEGA CAP Tech stocks. Healthcare stocks as you know are a more defensive group with less volaltility than tech or chip stocks. But it is still surprising that the XLV up 15.27% YTD has almost  recovered the performance gap with the tech heavy QQQs up 16.35%. Also for the first time in many years the managed FUNDs and ETFs are doing well. Here is some performance data of important ETFs and FUNDS in biotech and healthcare.with some takeaways:

1. The performance of our large cap biopharma stocks continues to impress considering the political baggage they have had from Medicare Pricing Legislation (IRA). Best stocks are ABBV, LLY, REGN, and VRTX. Recent trades were PFE sold at a profit at 30+ and new buys were nibbles on AZN and GILD.
2. Note that the IBB has recovered to Up 9% YTD about equal to performance of IWM.
3. Our top Life Science Fund pick is PRHSX up 16.59% YTD, but two other Funds in the same biotech category are FBIOX and JNGLX are up 19%.

1.  Our recent articles have focused on Small and Mid (SMID) caps for active traders, The main tracking ETF for these stocks is XBI and sometimes the ARKG but it is more volatile.
2. THE US Medical Device ETF (IHI) really took off in August after the sell-off. The  MedTech sector has really lagged since 2022. Many of these stocks are also held in the Fidelity MedTech and Device Fund (FSMEX) up 6.49% in August. Major holdings include BSX, DHR, SYK and ISRG.

LONG: ABBV, LLY, REGN, VRTX, IHI FSMEX, PRHSX,XBI.