Are You Ready to Trade Biotech Stocks at the CUSP of a Bear Market?…Update-1

Update-1…DEC 27 a low volume trading day and the sellers have come on early as investors and traders rebalance their portfolios.And tax considerations play a big role.But SMID biotechs are trading actively and yesterday despite the XBI up less than 1% we saw many 2% plus movers on our trading list: HUMA, RZLT, RXRX, ABOS,and CYRX but note that are among the weakest on the SMID list.

TODAY the XBI was down again off 1.53% to $91.23. The winners as of midday trading are:  HUMA, TEM,  SUPN, ILMN so try to avoid trading till the new year.

LARGE cap biopharmas are doing better: BIIB,BNTX, and PFE. And of course GILD has been among our best picks up 16%.

We will give more frequent updates in the coming year with the JPMorgan Healthcare Conference coming up.

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Trading Biotech Stocks -Is There Any Momentum Left?

• The healthcare sector (XLV) is trading at 2024 lows, down 11% over 3 months while many SMID biotech stocks peaked in early November.
• Many SMID biotech stocks in our momentum driven “Trading List “have done well but the XBI is down over 8% in 3 months.
• Seasonality still favors SMID and MEDtech stock picks through early January. Select large cap biopharma are strong holds:ABBV, LLY, VRTX.

It’s not a bear market for biotech yet it just feels that way because recent trends are down and healthcare stocks are not a stabilizing force. Moreover the backdrop of interest rates increasing since the FED Meeting last week with the 10 year yield back above 4.5% Layer on that is the uncertainty caused by geopolitical turmoil and a new TRUMP 2.0 Administration in the U.S. .

Some well known large cap biopharma stocks have already made a correction over the past six months: Merck (MRK) down 24%, Vertex (VRTX) down over 11% in one month and Regeneron (REGN) down 32%. Even ABBV took a hit. And the major catalyst for the recent sell-off was the killing of the United Health CEO and “backwash” criticism of our healthcare system. The large cap weighted IBB is down 4% in one month.

So if you still believe in health science innovation you have got to find winning trades in small and mid-caps (SMID) life science stocks. We have covered this trade in the past so let’s recap by reviewing our previous posts on SMID life science trades. We have updated our list below as of last Fridays’ close. Although many of the trades were profitable the real objective is to find long term winners not so easy in biotech. Here are several winners YTD despite the recent sell-offend keep in mind the bellwether XBI  at $91.54 is only up 2.53% YTD. The ARKG is down 27% YTD!

• Winners YTD: ADPT up 30%, CPRX up 26%, CRMD up 127%, CRNX up 51%, EXEL up 38%, GERN up 92%, GH up 17%, NTRA up 158%, NVAX up 81%, QDEL up 39%, SUPN up 22%, TWST up 30%, VCEL up 58%, VCYT up 8%.
• Some of these stocks should be removed from the list but some are still tradable despite the  volatility like CRBU, DNLI, PACB, TEM. Others will probably be cut: EVH, IMTX, TXG.
• The MEDTech sector should do better in 2025  with improved earnings and a little bounce from M&A. The IHI was up 9% YTD.
• A surprising result was the severe sell-off in Life Science Mutual Funds some of it is because of dividend pay outs and overweight in UNH. PRHSX down 9% YTD. JNGLX down 1.61% YTD.We need to look at results in the funds more detail.

There is a lot to unpack here and I dont want to get too positive because trading SMID biotechs that don’t have earning growth is very difficult. But there is plenty of interest in biotech and a lot of speculative money around. If we get a rotation out of technology and communication service money should come into healthcare and life science investments.

Trading today as of 3P EST is mixed with the QQQ up 0.8% and the XBI flat up 0.3%. UNH is up over 1%.

LIFE SCIENCE TRADING LIST