Biotech Portfolio Review: What To Do Next?

• Innovation is a Key Driver of the Life Science Industry.
• The wild card is progress with COVID vaccines.

Your biotech portfolio is probably up at least 10% YTD because the IBB is up ~17% and the XBI up 18.35% while the S&P 500 (SPY) is flat YTD. The tough call is that if Technology (XLK) is also up 18% YTD similar to biotech performance. Do you raise cash or go more defensive with the life science positions you own?

Here are three model portfolios to track within life science and healthcare but independent of your overall holdings. We kept 10% cash in all model portfolios because of the run-up and need for future buy ins. With a few exceptions we have not included many of our top picks because of their excellent one year performance:  ABBV, BMY, GILD, GNMK, MRK, RHHBY, TDOC etc.

Here are a few general assumptions in developing these portfolios:

1. Biotech bull market continues with one 10% correction. The COVID pandemic has upgraded medical stock sentiment with many people because of a perceived greater need for therapies and vaccines
2. Underperforming sub-sectors will come back slightly as surgeries pickup.  e.g. medtech and devices.
3. Stock picking gets harder near market tops and more volatility caused by news, the 2020 election and geopolitical events.

Our biotech portfolio review will show which of the various ETFs and funds outperform .

Strategy One-Keep it Simple 

Stay With the Leadership ETFs Trending

• Three ETFs: IBB, XLV, XBI equal weight-30,30,30% and 10% Cash or split cash and GLD.

Strategy Two 

Overweight Healthcare but more Defensive Stance

• XLV and IBB 20% each, XHE Medtech 20%; BMY 10%  JNJ 10%  UNH 10%, Cash 10%.

Strategy Three

Diverse Life Science and Mutual Funds; More Trades.

• IBB and XHE 20% each; FBT 10%.
• Three Life Science Funds: FBIOX, FSMEX, PRHSX 10% each
• 10% trades in mid-cap or large caps: AZN, CRSP, XNCR initially.
• 10% Cash.

These biotech portfolios will be reviewed monthly through 2020.