Traders and Investors are Outperforming with Biotech Stocks
- Biotech stocks beat the S&P 500 and technology stocks with the IBB up 29.46%. The XBI is up 37%.
- The retail investor can achieve good gains in biotech using Funds or ETFs but would need to add SMID caps to maximize gains.
- We have developed a trading Model for SMID cap biotech stocks which has achieved outperformance with active trading using a momentum strategy.
The biotech sector has exceeded most expectations up about 30% YTD despite Government pushbacks on drug pricing and an apparent lack of support for basic life science research from our vast University resources and the NIH. We predicted a good year as early as June during ASCO focused on Precison Oncology with breakthroughs in targeted therapy and high sensitivity molecular diagnostics. What has happened over the past 45 days is many generalist investors jumped in to the sector because of stock and sector momentum so one issue for 2026 is can the performance continue? The question for us was how much to allocate to healthcare and biotech stocks given the strength of technology sector and notorious volatility of SMID biotech stocks. This issue combined with the downdraft of some large cap stocks in the sector such as United Health resulted in weakness for the healthcare sector. The XLV is now up 11.4% YTD primarily because of large cap biotech with the IBB up 29% and the XBI up 37%. So assuming the momentum continues in Health Science stocks and that the smaller caps as tracked by the IWM and IJR do well in 2026 here are strategies to play healthcare and biotech stocks in 2026, depending on your level of risk.
- Buy one FUND and one ETF that covers health science stocks. For example buy the large cap weighted IBB up 29% with either the Top Rated Fidelity Select Biotech Portfolio (FBIOX) 25.95. up 37.5%% YTD or more diversified T.Rowe Price Health Science (PRHSX) $93.69. up 17% YTD.
- As your knowledge of healthcare and health science stocks improve you might want to diversify with individual health science stocks in MedTech such as Intutiive Surgical (ISRG) and Abbott (ABT). Or add an ETF for US Medical Devices such as U.S. Medical Devices (IHI).
- Develop a more complete Life Science Portfolio by adding selected Large Cap dividend stocks like an ABBV or GILD.
- Improve overall performance adding Biotech stocks with our SMID BiotechTrading List. But these stocks are quite volatile and will require active trading.
We currently hold several SMID biotech stocks that have exceptional returns YTD and if you include our large cap holdings ABBV and GILD as well as profitable trades our biotech portfolio easily beats the XBI up 37% YTD. All of these stocks were covered in our weekly posts.
Adaptive Biotechnology (ADPT) $14.75, up 146% YTD.
Cognitive Bioscience (COGT) $38.up 397%YTD.
Eyepoint Pharmaceuticals. (EYPT) $18. up 138% YTD.
Guardant Health (GH) $102, up 233% YTD,
Personalis (PSNL) 9.56 up 88% 6 mos.
Roivant (ROIV) $21, up 89% 6 mos.
Rhythm Pharmaceuticals (RYTM) $104.6, up 8.85% YTD.
Xencor (XNCR) $17.30, up 89% 6 mos.
We are not including exceptional returns from Trades in the following stocks: CRMD, PTGX, RNA, RZLT, SUPN. We will update our SMID trading list at the end of this month.
Trading losses were minimal relative to gains (< 5%)