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A steady rotation out biotech and healthcare stocks into the Nasdaq-100 (QQQ) large cap tech stocks can be unnerving for portfolio managers. Even the S&P 500 diversified mix was up over 9% YTD while the QQQ soared 30.84% YTD. If you don’t own InfoTech, Semiconductor, and Communication Services stocks your performance is trailing the market. The VanEck Semiconductor (SMH) broke through its rising channel to $147.36 close to its 12/21 highs at the $159 level. Similarly, the QQQ rose 30% +off its 12/22 lows to the $348 level but shy of 11/21 levels above $400. So looking over a 2-year period we have a complete trend reversal of trends. We have to go back to the 1999/2000 time frame to track such disruptive market trends with generative AI and ChatGPT exacerbating calls. It is difficult to outperform the market if you don’t own AAPL, AMD, GOOGL, MSFT, or NVDA. But over 3 years the divergence between the NAZ and S&P is less severe.

The good news is that CASH yields 5%+

SMH 2 year.    

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QQQ 2 Year

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Clearly healthcare and biopharma stocks are lagging the general market and are not providing sufficient growth to overcome MACRO, higher interest rates and political concerns. But some Life Science Funds are holding up and our Portfolio of SMID Life Science stocks is doing well. Clearly, stock picking is important in this wobbly market. But until Small Cap growth stocks regain momentum we can’t expect much from biotech.

• The primary performance indicator of SMID biotech is the XBI down 1.58% YTD but up 6.25% for the month and 235 over one year.
• The large cap weighted IBB is down 3.32% YTD but still up 9.75% over one year.
• Selected life science we own are holding uo better than sector ETFs: FBIOX, PRHSX.
• MedTech has been hit with a downtrend lately due to weakness in large cap stocks like ABT and MDT. The IHI is flattish YTD up one 0.91% but down 4.81% over 30 days and flat for one year.

Some large caps are doing well over one year: AZN up 8.73%,  BIIB up 46.4%, LLY up 35.84%, MRK up 20.32%, REGN up 6%, VRTX up 22.38%. Here is our last review of Large Cap Biopharma.

The XLV exhibits a seesaw pattern throughout 2022-2 despite a few spurts like at year-end 2022 so maybe revenues are not growing enough in a milieu of rising rates and still persistent inflation. We can point to a few disappointing earnings reports like United Health, Medtronic, Pfizer, and Abbott for the weakness.

XLV 2 Year.

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But our SMID Life Science Portfolio has some good winners YTD: CRSP, GERN, PACB, VCYT. We will focus more on this SMID sector in the days ahead particularly if the XBI regains momentum. With the ASCO Meeting coming up next week we expect to see important oncology data and a better tone to biopharma stocks.

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