When Small Cap Biotechs Lose Momentum: Are you an Investor or Trader? Update-2 QDEL

Update-2 2/17…QDEL beats on earnings and revenue of $3.37B. EPS of $13.80.Business combination with Ortho still in flux. Stock looks good on technical basis with accumulation. Good value with P/S 1.97, PE is 5.42 and P/FCF 6.45. Recommendation is a 2.0.—long QDEL added to position.

Update-1 A bad week for speculative biotech and all small caps. Last week because of weak momentum we suggested that you should take profits in some of these stocks.See the updated chart at the end. If the two major ETFs holding spec biotechs go down then it is hard to fight the tape. Also the Russell 2000 (IWM) was down 3.39%.

• Almost all of our small cap biotechs lost big last week with the IBB down 3.1% breaking uptrend and the XBI down 5.28%.
• The ARKG was down 8.82%.
• Looking for EVH, HOLX, and SUPN to hold up for the month.

Small Cap Biotechs Lose Momentum

• Bullish momentum is reflected in the ARKG up 25% YTD and XBI up 8.9% YTD.
• Among the top holdings of ARKG are TDOC, EXAS, PACB, CDN and VRTX.
• The IBB is up 4.04% YTD but off 2023 peak of $138.26.

A few small cap biotechs lost momentum last week so now might be the time to take profits. I did not sell but added to CRSPR (CRSP) which has been a laggard. I also  bought another gene therapy stock Intellia Therapeutics (NTLA) at a price of about $43. Many pundits and analysts say this is just the “January effect” whereby loser small cap stocks snapback after losses are taken in 2022. But many of these stocks are favored because of their core technology and favored by funds like ARK Genomics (ARKG) and also are included in biotech ETFs like the XBI.

Hologic(HOLX) reported last week and beat estimates despite declines in COVID-19 diagnostics revenue.. Surgical revenues were strong as was cash flow of $254M with buybacks, the Price to FCF is a 10 and the PE is a reasonable 16.5. We are holding the stock.

Some of our biggest losers bounced back CYRX up 9.4%, and QDEL up 3.93%. Only loser last week was PACB but it is up 59.6% since we bought it at near the bottom in 2022.

Moving forward I’ll use the XBI as the indicator of when to sell if I need cash. Technicals and news may determine what to do.Many of these stocks are speculative so check the balance sheet.

Long all of these stocks: