SMID Cap Life Science Update: Are You An Investor Or Trader?

SMID Life Science Stocks: Investor or Trader?

  • Despite choppy trading, there is an upward tilt to life science stocks since the 9/26/22 lows.
  • Three stocks are strong holds: EVH, HOLX, and QDEL.
  • Can gene therapy breakthrough in 2023?

Our SMID (small and mid) life science portfolio had a good week despite a choppy market focused on the FED and rising bond yields. In our previous weekly post, we showed a small correction with many traders taking profits from the so called “January Effect” which was strong this year. The question going forward is whether small caps can continue their momentum with the MACRO headwinds and not supported by earning growth. Well, two of our picks in this SMID Portfolio are supported by good earnings: Hologic (HOLX) and Quidel/Ortho (QDEL). Many of the other companies do not have growing revenues but are more driven by their milestones, business model and overall biotech market strength. The more speculative stocks took a hit and are off their 2023 highs: CRSPR (CRSP) and Geron (GERN). But overall the portfolio is well in the money. Pacific Bioscience (PACB) and Veracyte (VCYT) are well known momentum stocks favored by traders and are holding up well. Our favored holdings at this point in time are EVH, HOLX, and QDEL. Two weeks ago based on waning momentum in bellwethers ARKG and XBI we suggested that short term traders take profits.

Last week among the positive sectors were the Small Caps IJR up 1.42% and IWM up 1.48%. Healthcare was a laggard down 0.42%.

(Click on image to enlarge)

  • We added to our position Quidel (QDEL) based on recent earnings and guidance.
  • Biggest losers are CRSPR Therapeutics (CRSP) and Cryoport (CYRX). We bought Intellia (NTLA) to complement CRSP position in gene therapy.
  • CRSP and PACB are among top ten holdings of ARKARKGARKGG.
  • The Evolent (EVH) Health chart broke through the $32 level. The analyst recommendation is at 1.70. Financial results are coming on 2/22.

    (Click on image to enlarge)

We are encouraged by small cap outperformance in life science stocks in the face of bearish commentary from many top strategists. However, to maintain the momentum we will need extensive debt and equity financing to move pipelines forward. Moreover, M&A has been running at a low level but valuations are attractive.

No positions have been sold since 1/20/23 date of our first post; % performance is from our actual trades.

    P 1/20/23 % Perf 2/4/23     2/18/23        
Company Ticker $   P % week % Perf P % week % Perf    
CRSPR Therap CRSP 49.61 -25 55.27 4.72 -15 50.89 2.23 -2.66    
Cryoport CYRX 21.75 -42.34 25.24 9.41 -33 21.03 2.54 -44.25    
Evolent Health EVH 30.83 13.74 31.96 2.21 17.91 33.05 2.01 21.94 H 2/22  
Geron GERN 3.19 9.24 3.22 3.59 10.27 2.81 -6.64 -3.71    
Hologic HOLX 79.66 22.41 84.68 2.28 30.14 82.73 1.06 27.13 H  
Pacific Biosci PACB 11.29 55.68 11.58 -1.7 59.67 10.45 3.88 44.09    
Quidel/Ortho QDEL 88.13 -11.56 89.7 3.93 -9.98 91.39 5.65 -4.57 *added  
Supernus SUPN 40.3 12.3 41.61 2.29 15.95 39.3 1.63 9.51    
Veracyte VCYT 24.89 39.43 26.67 2.46 49.41 25.46 4.56 42.63    
SPDR Biotech XBI 86.99 14.75 90.39 1.12 19.24 86.8 2.39 14.5    
Invitae NVTA 2.555 2.62 3.15 0.67 2.18 -20.61 -16.38    
iShares CoreS&P IJR           105.1 1.42      
iShares Russell IWM           193.13 1.48      
iShares BIO IBB           133.36 0.76  

More By This Author:

Large-Cap Biopharmaceuticals: Bearish Sentiment Curbs Buyers
When Small Cap Biotechs Lose Momentum: Are You An Investor Or A Trader?
Sector Shift Stalls Healthcare Stocks But Biotech Shows Gains In January
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