Healthcare Stocks Are Fading: Over-Owned Or Rotation Effect?

Update-1  10:30 am DST Genmark Diagnostics (GNMK) up 29% on Roche $1.8B Buyout

Healthcare Stocks Are Fading as Economy Starts to Recover

  • Large Biopharma stocks still offer growth and value.
  • Stock picking is harder in diagnostics and vaccines.
  •  Balance your portfolio with small-cap ETFs.

If you have been reading my recent posts you know that there has been a rotation out of technology stocks and into so-called “re-opening” or value stocks as the economy begins to recover. The coronavirus pandemic triggered a big move into biotechnology stocks because of rapid developments in diagnostics therapeutics and vaccines. Now that COVID vaccines are proven to be effective we are looking forward to a 2022 recovery. The rotation into energy, financial and industrial stocks has picked up in 2021 leaving healthcare stocks lagging. Biotech can be seen as having growth and value aspects with large-cap biopharma also offering a defensive posture, And small and mid-cap biotech have always had a momentum component because of drug breakthroughs and M&A.

Traders Like the Fast Lane with Speculation in Small-cap Biotechs

Since our correction in late February/ early March, we have seen a nice bounce-back looking at the iShares MicrCap ETF (IWC) as well as the XBI. The XBI at $146.51 bounced off a daily low of $130 and is trying to get back to the $150 key support level. The (IPO) has recovered about 10% off its lows.

For a real measure of bullish sentiment in smaller cap biotechs, you can venture into the ARK funds. The ARK Genomic Revolution (ARKG) at $91.80 is about 10% above 2021 lows of $80. Among the top holdings of ARKG are well-known stocks we have covered over the years: TDOC, PACB,  REGN, and RHHBY.

See How Healthcare Stocks Lag

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Disclosure: Long ABT, ABBV, BMY, JNJ,  MRK, UNH.

Disclosure: None.

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