Update-3 10/15/21
10/15/21…9/20a Broad rally carries biotech stocks off recent bottom with IBB to $155 to $157.87…XBI up 1.67% to $127.10. But technology shares gave been stronger.
Retail sales rise 0.7% despite supply chain issues. Pre-market looks good with futures up. Earnings expectations are strong. We need several days of trading and get through the earnings cycle to gauge sector trends.
Maybe the rotation into value and cyclical stocks will keep traders out of speculative biotech as boot the IBB and XBO showed selling relative to indices.
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Update-2 10/13 Better tone to the tape today but we still need to get through the earnings cycle. Market came back on FED taper tawk. QQQ up 0.8%.Some good green moves but spotty:
- Winners among focus mid-caps: QDEL TDOC VCYT. Big loser down 5.67% CRISPR Therapeutics (CRSP) on results of early stage CAR-T cancer results.
- XBI holds the $125 line while BNTX MRNA NVAX rally. CLLS up 5%.
- Mid-cap tape is mixed: BHVN FATE XNCR up; BMRN FOLD NTLA SRPT down.
- United Health (UNH) beats up 4% to $420, guidance raised COVID costs lower. UNH is a 25% weighting in our healthcare portfolio.
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Update-1 10/12…Chop continues with end of day weakness. But we need to get some earnings reports. SMH down over 1% to $250.67.Apple notes chip supply issue as stock falls after hours.
- Some green in small/mid cap focus stocks: CYRX, CRSP, VCYT. XBI holds $124 handle. ARKG up 1.98%.
- IBB cannot hold early gains but still near $155.
- Large cap laggards:AMGN BIIB BMY VRTX.
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Biotechs Stocks Are Lagging, Time to rebalance your portfolio?
- Biotech stocks are lagging with very weak technicals.
- The current earnings cycle is pivotal to market sector direction in a post-pandemic economy.
- Small/mid caps need to lead the way.
If you have been reading our recent posts you can see that biotech stocks have been in a funk. The IBB has broken through the SMA 200 support line near $160 and holds a perilous perch at $155 up only about 2.5% YTD. The IBB is down over 10% for the past 30 days tracking many analysts warnings about a September and October correction.Even the most stable healthcare ETF the XLV is 20 pts off its highs yet still up 11.4% YTD bolstered by United Health (UNH) that reports on 10/14 Thursday. Healthcare has been one of the leading sectors of the market up 11% in 2020 but weakening a bit lately. Healthcare stocks provide defensive growth with dividends from large caps. But even many large cap biopharmas are way off their 52 week highs. Here are several holding up within 20% of 52 week highs: ABBV, AZN, GILD, GSK, LLY,MRK, PFE and RHHBY.
But we are now in the midst of a potential re-rotation into cyclical stocks and away from momentum plays characteristic of small and mid cap biotech. The leading sectors over the past week are: energy (the XLE is up 18% over six months), financials, industrials anticipating the “reopening” trade. When combined with current supply chain disruptions energy and materials strength leads to inflation concerns. Even stagflation?
Our model healthcare portfolio has served us well coming up on a one year period since inception. But the IBB weakness poses a rebalancing issue with a sector shift out of growth and momentum into cyclicals and value. This trend shows the importance of a diversified portfolio because of potential changes in the economy.
Small Mid Caps Need to Lead the Way
Note that the IWM position has done well up 13 % YTD and small cap strength should continue if the US economy does well. But the small cap weighted XBI is down over 12% YTD having peaked in February 2021. Until the XBI shows momentum small cap biotechs are a risky trade because they are generally overvalued and not supported by fundamentals.
in addition to the Russell ETFS we own the (IJR) iShares S&P Small Cap ETF which has been stalled since June. Most of our speculative biotechs are down except for the focus stocks we have covered: CRSP, CYRX, QDEL,VIAC which also were down the last two weeks
Over the past year we updated the model to include a Medtech position such as the iShares U.S. Medical Device {IHI} which should track a re-opening economy. Our best picks for mutual funds are the T.Rowe Price Health Sciences Fund {PRHSX} and for MedTech the Fidelity Select Medical Technology (FSMEX) Portfolio.
| PORTFOLIO | ||||||||||||
| 2020 | 2020 | 2021 | 2021 | |||||||||
| Stock/ETF | Ticker | Price | Wgt | 11/27 | %Perf | Price | YTD | 2020 | Price | 1 mo. | High P | |
| 10/25 | % | 1 mo. | 12/31 | %Perf | % Perf | 10/9/21 | % Perf | 2021 | ||||
| iShares NAZ Bio | IBB | 136 | 25 | 143.22 | 2.27 | 151.5 | 2.35 | 25.7 | 155 | -10.77 | 176.81 | |
| iShares Russell 2k | IWM | 163 | 10 | 184.37 | 16.56 | 196.4 | 13.02 | 18.3 | 221.58 | -1 | 234.42 | |
| Merck | MRK | 80 | 10 | 79.86 | 2.4 | 81.77 | 3.3 | -10 | 80.63 | 6.99 | 85 | |
| United Health | UNH | 330 | 25 | 337.94 | 5.44 | 350.7 | 18.46 | 19.3 | 408.46 | -1.67 | 429.71 | |
| SPDR S&P Bio | XBI | 117 | 5 | 131.46 | 11.95 | 140.8 | -12.32 | 48 | 123.44 | -6.7 | 174 | |
| Healthcare SPDR | XLV | 108 | 25 | 109.44 | 3.35 | 113.4 | 11.9 | 11.4 | 126.94 | -6.65 | 136.81 | |
| T.Rowe Hlth Sci |
PRHSX
|
***** | 54 | 9.45 | 108.24 | -6.5 | 117.14 | |||||
| iShares U.S MedT | IHI | new | 54.83 | 14.48 | 62.45 | 24 | 67.15 | |||||
| For tracking | ||||||||||||
| ARK Genomic | ARKG | 93.26 | -19.88 | 71.88 | -14.45 | 115.15 | ||||||
| Fido Biotech |
FBIOX
|
** | 25.18 | -11.56 | 21.61 | -7.61 | 27.73 | |||||
| DOW | DIA | 13.65 | 347.53 | -0.91 | 355 | |||||||
| S&P 500 | SPY | 17.33 | 437.86 | -2.89 | 453 | |||||||
| NASDAQ-100 | QQQ | 15.11 | 361.16 | -5.15 | 382.11 | |||||||