Have we reached a tradeable bottom in the biotech bear market?
Today’s tape showed good volume but gains faded late in session.
Nasdaq up 0.35% XLV up 0.88%-healthcare is the leading sector
The biotech market bounced back early today in a broad rally then faded with the IBB up 0.625 % stuck in 250-260 range and the XBI up 0.5%. Large caps were mainly green across the board: Celgene (CELG) up 2.65%, Alexion (ALXN) up 1.73% and Amgen (AMGN) up 1.15% among the leaders. Mid caps were choppy: Alkermes (ALKS) up 2.65%, Incyte (INCY) flat and Vertex (VRTX) up 1.98%; smaller cap winners were : Medivation (MDVN) up 4.4%, Kite Pharma (KITE) up 1.64%, and Ultragenyx (RARE) up 3.1%. Caution: we have not yet had a three day rally and today was a bit disappointing.
Our Life Science Portfolios are being “reset” as we navigate the malaise of macro issues and earnings reports. Although the healthcare sector offers good investment alternatives in a market that is seeking value, safety and yield, the sentiment has shifted toward extreme caution. Biotech stocks first need to recover from the 2015 “bubble” mentality that has severely damaged the market near term with the IBB off 25% YTD and 31% off bull market highs in August. It has become very difficult to analyze stocks based upon product pipeline, technology or market potential when the market views growth more skeptically and looks for real financial returns from cash flow, profits and dividends. Moreover it will become more difficult for emerging companies to raise money at an attractive price.Consequently investors need to focus on large cap biotech where financial metrics and new products are more easily evaluated. But biotech has always attracted traders and speculators so the momentum will return to the upside should global fears wane. In the meantime look for the following trends:
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