Update-1 FEB 11, Momentum easing with some good stocks moves, XBI off 1.3% to $165.83.
Coronavirus focus stocks are mixed with our holdings doing well. ABT up 1.24%, HOLX up 0.53% and Genmark Diagnostics (GNMK) up 33% to $22.46 on rumors of being acquired, but nothing confirmed.
- Orasure (OSUR) down 2.54% on light volume, earnings next week.
- Volatile AXDX up 15%to $14.51 on insider buys.
- Vaccine stocks mixed BNTX down MRNA up, INO and NVAX flat.
- Gene therapy in the red: EDIT off 3.28% , NTLA down 1.67%, CRSP holding $158 level.
- Mid cap mover AGIO up 1.45% to $57.50 with new focus on genetically defined disease and re-structuring.
- Large caps: Biogen (BIIB) catch speculative bids on AD drug up 1.39% to $278.81.
Healthcare Sector Lags in Shift to New Winners: Energy and Financial Stocks
- But Small Caps Soar again bringing the XBI up 18% and IWM up 13% YTD.
- Large and Mid-Cap Biopharmas lead IBB up 12% YTD. GILD rallies.
- Providers drag down XLV -United Health earnings miss and new CEO.
Small cap stocks continued to soar with optimism for the longer term and speculation rampant. The market rally gained more momentum over the past week with a broad shift to lagging sectors energy up 8.29% and industrials up 4.88% while financials had a great week up over 6% with the XLF yielding 2%. And trading stocks seemed too easy with all major averages at new highs but importantly small cap and mid-caps are favored. The $7.2B acquisition of cannabinoid drug developer GW Pharmaceuticals (GWPH) by JAZZ Pharmaceuticals spurred the bullish tape no doubt as M&A is always drives the sector.
For now the “risk-on” momentum trade is on but it all depends on the COVID Vaccine rollout and virus containment.
Healthcare Sector Lags but Strength Continues in Life Sciences and Biopharma
As you can see from our model portfolio below it was hard to pick winners over ETFs. MRK and UNH are clear laggards. The Healthcare providers iShares US Healthcare Providers (IHF) was flat last week despite a great 2020 for UNH. As the market moved away for more defensive healthcare stocks to a “Re-Opening ” mentality traders sought out for more risky trades.
Small caps (XBI) outperformed large caps but earnings helped two of our larger cap biopharmas. Gilead Sciences (GILD) soared 4% on Friday’s earnings beat and $7.3B in product sales led by Veklury (remdesivir). GILD stock was $58.64 on Jan 4 adding credence to buying large cap laggards in January. two upgrades helped.
AbbVie (ABBV) moved up over 4% for the week on an earnings beat and strong guidance. Full year net revenues were $45.8B with strength in Immunology and Hematologic oncology but the Company has a broad diversified product portfolio including $2.59B in aesthetics for 2020.
Large cap biopharma leaders are ABBV, ALXN, LLY but both the IBB and XPH were better plays than others. We still own ABBV, BMY, MRK and RHHBY.
Coronavirus Trades and Portfolio
We are doing well trading COVID Vaccine stocks but long term holds elude us. We are recently long BNTX but missed big moves in CVAC and NVAX. Our core portfolio in diagnostic testing includes ABT, BDX, GNMK, and HOLX . Teledoc (TDOC) has been a solid winner up 44.5% in 12 months and 39% in one month! We still have high hopes for Orasure (OSUR) at $14.56 but technicals have been choppy. earnings come on FEB 17 and analysts average in at 2.3. Orasure is a leader in point-of-care diagnostic testing with expectations for a ramp up on revenues from a more convenient cost effective saliva collection device.
Here is our coronavirus portfolio from May/June 2020.
Long Term Winners-Recent Trades in Smaller Caps
- All of these stocks have been covered in previous posts.
- We have said relentlessly you can always overweight with the XBI.
Accelerate Diagnostics (AXDX): Spec stock gathering momentum and has always been a good trade under $10.
Editas Medicine (EDIT): From JPMorgan Conference in 2020 . Bought in 20s. Gene therapy is a bit frothy now but you have to be in it long term, Watch for breakthroughs with CRSP, DRNA and NTLA.
Glaukos (GKOS); from JPMorgan 2019 up 95% in six months ! Ophthalmic medicine company earnings coming on Feb 25.
Pacific Biioscience (PACB). Our best trade of the year but we got out too soon in 20s and early 30s. Sequencing is huge growth market especially to track viruses. We need to get back in.
Summary:
Overall we are doing extremely well. Our best portfolio is a small cap trading account tax deferred . Use options for leverage with large caps. Our biggest mistake is trimming big winners too soon. Don’t fight the tape.
| Stock/ETF | Ticker | Price | Wgt | P 11/13 | P 11/27 | %Perf | Price | QTR | 2020 Yr | Price | %Perf | |
| 10/25 | % | 1 mo. | 12/31 | % | % Perf | 2/6/21 | YTD | |||||
| iShares NAZ Bio | IBB | 136 | 25 | 141.06 | 143.22 | 2.27 | 151.5 | 11.9 | 25.7 | 169.05 | 12.1 | |
| iShares Russell 2k | IWM | 163 | 10 | 173.51 | 184.37 | 16.56 | 196.4 | 30.9 | 18.3 | 221.65 | 13.05 | |
| Merck | MRK | 80 | 10 | 81.09 | 79.86 | 2.4 | 81.77 | -1.39 | -10 | 75.8 | -6.37 | |
| United Health | UNH | 330 | 25 | 355.67 | 337.94 | 5.44 | 350.7 | 12.5 | 19.3 | 333.58 | -2.61 | |
| SPDR S&P Bio | XBI | 117 | 5 | 125.04 | 131.46 | 11.95 | 140.8 | 26.3 | 48 | 166.78 | 18.47 | |
| Healthcare SPDR | XLV | 108 | 25 | 112.12 | 109.44 | 3.35 | 113.4 | 7.55 | 11.4 | 115.67 | 1.97 | |
| S&P 500 | SPY | 387.71 | 3.71 | |||||||||
| NASDAQ-100 | QQQ | 331.36 | 5.62 | |||||||||
| Fido Biotech | FBIOX | 27.25 | 8.22 | |||||||||
| ArkGenomics | ARKG | 109 | 20.23 | |||||||||