Risk On for Biotech-Time To Trade the Small CAPS!…Update-2…caution?

Update-2 11/10/23…Reversal from yesterday’s bad tape, back to TECH stocks and NAZ up 2%. Small caps up but lagging same for biopharma. Hologic a big winner, other SMID winners: CRSP, QDEL,SUPN, VCYT–ILMN a big loser.   IBB up 0.48%.

Update-1 2:15 P EST …Something is rattling biopharma stocks. Was it the BD earnings slight miss (Company cites China! and War in Middle East) or the dual pricing by Lilly (LLY) down over 4%,for the same chemical entity and new competition from Astra Zeneca?  Or was it the usual FED speak blather about higher for longer.

• BD Q4 Rev of $5.1B an increase of 6.8%, FY23 $19.4B incr by 2.7%, FY 24 guidance of 5.74% rev growth.
• SMID winners: CYRX, SUPN.  many losers like CRSP and XBI…. A big volatility day. IBB down 28% to $115 handle.
• Large caps down across the screen except AZN and UNH.

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Buy a Small Cap Biotech Today

• Seasonality favors small caps through January 2024 many are beginning to look good on technicals.
• Strategy is based on Momentum but with compelling technology and M&A potential.
• Lower rates are positive for biotech and M&A.

We saw many of our SMID Life Science stocks trade up big last week so we are tempted to be more aggressive adding speculative biotech positions. Last week we added CRSP to our longs  and went into the volatile ETF the Ark Genomic  Revolution (ARKG) based on holdings and previous technical action. We will also track potential new trades in 10X Genomics (TXG) ,Vericel (VCEL) and Caribou Biosciences (CRBU). But as you can see the damage was severe in 2023 becaus the market preferred MEGA-TECH stock in 2023.

We also picked Becton Dickinson (BDX) up 2.9% last week to $258.91, FWD PE is 19.2, P/S 3.94, Recommendation is 1.76.If you don’t want to pick risky biotech stocks then buy  a core life science position with PRHSX or the IBB. PRHSX has among top holdings: UNH, TMO,REGN, LLY,MRK etc.

We have summarized  below some of the Small and Mid Cap (SMID) life science stocks that we own and recorded the trades in a post on February 26,2023 when speculative small caps started sinking. So we have trimmed back most of them.

Key Points to Consider:

1. These stocks tend to move as a group and correlatesto the XBI.
2. Buying comes more from bankers and biotech specialists rather than retail generalists.
3. The following stocks are more senstive to sales and earnings: EVH, HOLX, QDEL.
4. All small cap ETFS are trading with current momentum; IJR, IWM, XBI.
5. The IBB looks more bullish after hitting bear market lows.

We will update the trades on Wednesday.

Selected Well Known SMID BIOtechs- a screen not a buy  list.