Update-2 10/2/25… MAJOR Market Indexes compared to biotech: QQQ up 18.48% at $605.73, S&P 500 (SPY) up 14.19% at $669.22, DJI up 9.34% at 46,519.
- Ark Genomic Revolution (ARKG) up 26.58% ytd at $29.81.
- iShares biotechnology ETF (IBB) up 13.17% ytd at $149.62.
- SPDR S&P Biotechnology ETF(XBI) up 13.91% ytd at $109.59.
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Update-1 SEP 30, 2025: Healthcare stocks rally helped by Pfizer /Trump Rx deal allaying worse fears of price controls (?) while offering a controversial approach for lower prices. The new government WEB site ‘Trump Rx” apparently will offer lower prices dealing directly with the Government? Read tomorrow’s news for details. Pfizer stock surged over 6% after the announcement.Many other biopharma stocks rose today after the announcement: MRK 6.8%, LLY 5%, GSK 5%, NVS 3.34%, AMGN 3.5%, ABBV 3.76% although no other deals with the WH were announced. This direct purchase and investment deal may be construed similar to the INTEL deal whereby the US government becomes involved directly with companies as kind of ‘investment banker” and investor. But there will be plenty to read about this for the rest of the week, such as how PBMs will be affected.
The sentiment shift in the healthcare sector was big enough to move the XLV up 2.41% to $139.17.
Biotech stocks also ran up today along with some of our favorite SMID picks. The IBB was up 1.38% and the XBI was up 0.8%. Among our big winners for the month were those in the “Précision Oncology” group; ADPT up 11% to $14.96,PSNL up 2.68% to $6.52; but SMID caps biotech stocks are being helped by gains in the Russell 2000 (IWM) up 2.89% for the month with strong momentum from SMID stocks like LGND,PTGX,RNA and RYTM.
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Healthcare Stocks are Coming Back and Biotech is Leading the Way
- The Healthcare Sector as a component of the S&P 500 has declined since late 2023 and has a weighting of only about 8-10% .Technology (XLK) sector has about 33% weighting and has been dominant since early 2023 and the XLK really took off in April 2025 with the AI trade.
- Large cap biopharmas are the base portfolio position: ABBV, GILD, LLY, VRTX and FBIOX.
- The Innovation trade is SMID biotech up over 10% YTD at minimum. (See trading list).
Last week we summarized our healthcare equity strategy for the healthcare sector which was to focus on biotech stocks. The core of a biotech strategy should be large cap biopharmaceuticals which still have good value and can offer returns comparable to the S&P-500 and as we have shown in a recent article. This week our top biopharma picks have performed as follows: ABBV (ABBV) MTD 5.88% YTD 24.15%, GILD MTD (2.35%) YTD 21.36%, LLY MTD (!.56%), (6.15%) YTD, VRTX (0.37%) MTD (4.21%) YTD. So even with two losers you are still ahead of the SPY up 2.58% MTD, up 12.92% YTD. If you market weight up to two other favored large caps like JNJ up 24.5 % YTD or RHHBY up 12.6% YTD, your performance will be better. Or with owning the widely followed Fidelity Select Biotech Portfolio (FBIOX) up 14.66% you achieve similar performance, with more diversity with SMID caps including ALNY and KRYS.
Nonetheless with a large cap biopharma focus for healthcare portfolio you will outperform the XLV down 1.5% YTD. The Healthcare Sector has come back strongly over the past month but it is better to look at individual components or biotech stocks. The iShares Global Healthcare ETF (IXJ) is flat YTD up only 0.35% while the IBB is up 6.62 %YTD. Another healthcare investing strategy at this point would be to go to large cap stocks like Elevance (ELV) $318.61 down 13.6% YTD, Div about 2.1%; or CVS Health (CVS) $75.77 up 68% YTD Div up 3.5%. Another trade would be to bet on a turnaround for United Health (UNH) $344 down 31% YTD, Diiv 2.57%. Watch for the turnaround with Healthcare Providers (IHF) $49.10, up 2.27% YTD which holds all three stocks.
SMID Biotech Sector-The Innovation Trade
Another strategy to improve the performance of your healthcare portfolio is to add Small and Miid Cap (SMID) biotech weighting which can be difficult for those who are not experienced traders or who know the life science area. The two ETFs we have used to trade or track this sector are the ARKG up 10.64% MTD, up 16% YTD; and XBI 99.40,up 10.63% MTD. 10.39% YTD. Most of the well known life science funds like PRHSX 79.50, flat YTD or FSMEX down 7.59% YTD are well diversified but do not track SMID cap biotechs.
In mid 2023 we began more detailed coverage of SMID Caps through our momentum strategy. We pre-screened SMID biotechs through publicly available analyst coverage based on CASH position, technology, markets and technicals. The result is many long term winners as well as profitable trades . We have identified these trades as we peridiocally post them. Some of the winners we still hold are; ADPT, COGT, CRMD, CYRX, EYPT, GH, RYTM, SUPN, VCYT, XNCR.
Update coming at end of Q3.