Update-3 10/29. 1p EDT…Earnings reports stabilize biopharma stocks. Vaccine stocks strong.
- Gilead Sciences (GILD) beats but lowers guidance.Needs clinical news on deals. Stock lower.
- Amgen (AMGN) holds $216 after beat, osteoporosis drug opportunity.
- Early movers: ALKS, BNTX, CVAC, GNMK, MRNA, NVAX, OSUR, QDEL
- XBI flat at $114.
Update-2 10/27…NASDAQ up 0.64% and many life science stocks show gains on a choppy day.
- Portfolio winners: CRSP up 4.24%, GNMK up 2.85, TDOC up 5%, XBI up 1.35% (new buy).
- Coronavirus winners: HOLX up 3.47%, INO up 3.47%, NVAX up 2.53%,QDEL up 3.86%.
- Large caps flattish to down except VRTX up 2.43%.EXAS soars 23% on a $2.15B buyout of a cancer screening (iquid biopsy) Company.
- 52 week highs for: ARNA, BIO, DHR,TMO.
Update-1 10/26…S&P takes a 1.86% Hit on Lack of Stimulus and a Spike in Cases
First look at winners among our holdings: ABT up 1.13% post last week’s earnings, AZN up 2.06% on resumed vaccine trials, BDX up 0.72%, OSUR up 6.77% a rapid COVID test play, PACB up 0.36% a small cap sequencing play.
- QDEL up 6.13% and VIR up 3.03% regain momentum.
- Added CRSP at $94 handle.
- IBB down 1.01%, XBI down 1.34%.
Stay the Course in Healthcare Stocks Despite Choppy Weeks Ahead
- Healthcare and Biopharma Stocks Rx for Choppy Trading.
- Small Caps are the Wild Card.
- Momentum is waning to a risk-off situation.
We had the Fourth Quarter rally that I called in August but now we have brief period of uncertainty through next week’s earnings and the election. In mid-November through December the rally should resume unless new economic and geopolitical issues arise.Technology and biotechnology stocks have been the 2020 leaders because they fit with the needs of the pandemic crisis.We have written about how biotech stocks have helped fight the pandemic with antivirals, vaccines and diagnostics and these products will play a big role in 2021.
It easy to get rattled with all the election choppiness and rising coronavirus infections. Over the past week there has been a bit of a sell-off in momentum stocks with profit taking. Within biotech we can see the choppiness in more speculative coronavirus plays: INO MRNA NVAX VIR, as well as strong mid-caps: BMRN, CRSP, SRPT. We have traded CRSP and we want to come back to this stock because of longer term innovation potential in gene editing. After a brief sell-off from double top highs above $121 the XBI has rallied and for now settled near $117. XBI adds beta and momentum to your portfolio, especially with small caps.
Smaller Cap Life Science Stocks are Doing Well
Our speculative portfolio of small stocks has soared off the March bottom led by stocks like Accelerate Diagnostics (AXDX), Genmark Diagnostics (GNMK) and Pacific Biosciences (PACB) but momentum has ebbed and we have raised the cash position to 15%. This speculative portfolio outperformed the IWM which is up 13.2% over one month to $163. So we need strong performance in the iShares Russell 2000 (IWM) or even the iShares Russell Value 1000 (IWD) to keep biotech rolling because many Life Science stocks are small caps
Core Healthcare Stocks With Dividends and Less Volatility
The XLV took a brief hit to the $100 level but recovered and is up 8.9% over six months. The IBB did a little better up 10.5% over six months. Large cap biopharma are core positions in a life science portfolio and both ETFs provide positions. United HealthGroup Inc (UNH) is up over 14% over six months and currently represents a better “pure play” in healthcare. Our top picks in large cap biopharma with less volatility are: Merck (MRK) a leader in oncology and Roche ADR (RHHBY) a leader in oncology and diagnostics. More speculative plays are GileadSciences (GILD) near a technical bottom at $60 with a bet on all the deals they made; an BristolMyers -Squibb (BMY) betting on the Celgene deal. We will update the Large Cap metrics and performance as we get through earnings over the next two weeks.
Getting Through the Flak
If you are averse to trading or rebalancing in the upcoming chop over the next 3 weeks here is a short “plain vanilla” mini-healthcare portfolio with weightings that may do the job:
IBB $136 25%, IWM $163 10%, MRK $80 10%, UNH $330 25%, XBI $117 5%, XLV $108 25%.
Stay the course until after the election and earnings “helps clear things up”. Perhaps one can move more aggressively back into momentum picks like: CRSP, VCYT, VIR, XBI. Or should investors consider a sentiment shift to a “re-opening” of the economy with cyclicals and go beyond housing (XHB) to consumer stocks and materials/ Not yet.
| PORTFOLIO | ||||
| Stock/ETF | Ticker | Price 10/25 | Weight | |
| iShares NAZ Bio | IBB | 136 | 25 | |
| iShares Russell 2k | IWM | 163 | 10 | |
| Merck | MRK | 80 | 10 | |
| United Health | UNH | 330 | 25 | |
| SPDR S&P Bio | XBI | 117 | 5 | |
| Healthcare SPDR | XLV | 108 | 25 | |