Good Entry Point For Biotech Stocks

Good Entry Point for Biotech Stocks

  • Seasonality and technicals favor entry-level portfolio positions for biotech.
  • Trading in speculative small-cap biotechs is picking up.
  • ARKG and XBI are bellwethers.

Life science and biotech stocks had a good week with the most well-known ETFs up 3-4% for the week and off recent bottoms. It looks like bottom fishing with a boost in sentiment. Technicals are looking much better as well. If we get any pick-up in M&A, small/mid cap stocks should move up toward the seasonal rally with the ASCO Conference in June.

Despite a backdrop of higher Fed fund rates, geopolitical concerns, and higher commodity prices fueling inflation, stocks edged higher late Friday. The market was helped by the country’s jobless rate falling to 3.6%. The market is still focused on energy and impact on Russia as the ruble was up 23.2% for the week. Among the many sector winners were real estate, consumer staples, and China. Latin America is very strong. We need a Russell 2000 rally to boost biotech.

(Click on image to enlarge)

(Click on image to enlarge)

Our portfolio positioning throughout 2021-22 has been weighted toward large-cap biopharmaceuticals in the following order: ABBV, REGN, RHHBY, VRTX, BMY. Also AZN and MRK look better.

Recently we have added more speculative ETFs as trades the ARKG up 7.28% for the week but down 21.57% YTD. The top five holdings of ARKG are TDOC, EXAS, PACB, CDNA, and REGN. We also added a small position in the XBI which holds NTLA, EDIT, AVXL, BEAM, and MNKD as top five positions.

Our new spec biotech stock high-risk trades are; ADPT, CRSP, DNA, EDIT, SGEN. We sold MDGL too soon in the 90s.

Add a small position in T.Rowe Price Health Sciences Fund (PRHSX) for the longer term.

Biotech ETFs Compared to Funds

  4/3/22         4/3    
Major ETFs Price YTD % 1 Year % 5 Year % High 5 yr P % week  
FBT 153.39 -5.29 -5.17 45.67 186.51 153.39 4  
IBB 133.06 -12.82 -12.18 36.11 177.37 133.06 3.82  
PBE 63.44 -10.91 -14.73 50 84.86 63.44 3.31  
XBI 93.26 -16.7 -31.94 34.5 174.79 93.26 4.06  
QQQ 361.85 -9.05 11.49 173.84 408.71 361.85 0.7  
XLV 138.07 -2 18.63 85.68 141.98 138.07 1.32  
Biotech Funds                
              YTD %  
FBIOX 16.66 -13 -31.1 -17.33 29.72 16.66 -13.9  
PRHSX 96.61 -7.18 -2.14 46.98 117.14 96.61 -7.18  
JFNAX 65.12 -3.87 -4.66 30.4 77.12 65.12 -3.87  
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