Healthcare Sector Lags But Small Caps Are Strong

Healthcare Sector Lags in Shift to New Winners: Energy and Financial Stocks

  • But Small Caps Soar again bringing the XBI up 18% and IWM up 13% YTD.
  • Large and Mid-Cap Biopharmas lead IBB up 12% YTD. GILD rallies.
  • Providers drag down XLV -United Health earnings miss and new CEO.

Small cap stocks continued to soar with optimism for the longer term and speculation rampant. The market rally gained more momentum over the past week with a broad shift to lagging sectors energy up 8.29%  and industrials up 4.88% while financials had a great week up over 6% with the XLF yielding 2%. And trading stocks seemed too easy with all major averages at new highs but importantly small cap and mid-caps are  favored. The $7.2B  acquisition of cannabinoid drug developer GW Pharmaceuticals (GWPH) by JAZZ Pharmaceuticals spurred the bullish tape no doubt as M&A is always drives the sector.

For now the “risk-on” momentum trade is on but it all depends on the COVID Vaccine rollout and virus containment.

Healthcare Sector Lags but Strength Continues in Life Sciences and Biopharma 

As you can see from our model portfolio below it was hard to pick winners over ETFs. MRK and UNH are clear laggards.  The Healthcare providers iShares US Healthcare Providers (IHF) was flat last week despite a great 2020 for UNH. As the market moved away for more defensive healthcare stocks to a “Re-Opening ” mentality traders sought out for more risky trades.

Small caps (XBI) outperformed large caps but earnings helped two of our larger cap biopharmas. Gilead Sciences (GILD) soared 4% on Friday’s earnings beat and $7.3B in product sales led by Veklury (remdesivir). GILD stock was $58.64 on Jan 4 adding credence to buying large cap laggards in January. two upgrades helped.

AbbVie (ABBVmoved up over 4% for the week on an earnings beat and strong guidance. Full year net revenues were $45.8B with strength in Immunology and Hematologic oncology but the Company has a broad diversified product portfolio including $2.59B in aesthetics for 2020.

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Disclosure: None.

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