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Timing Is Good For Small Cap Life Science Stocks

• Our portfolio has outperformed tracking ETFs.
• When MACRO issues get resolved growth and innovation will continue.
• New therapies are poised for approval in 2023-24.

If we can get through this latest funk in the market small and mid-cap stocks (SMID) are poised for a continued run. The overall market sentiment has been hit hard by MACRO concerns. The dominating narrative is the Fed and the Debt Ceiling. Most economists and financial analysts think it’s insane and destructive not to raise the debt ceiling in the current political game of “game of chicken”. But the pall that is cast over the market portends an economic debacle that could happen and cause a global crisis.  Most transactions are dollar dominated. if we don’t pay our bills bad things can happen in today’s polarized country.

But looking ahead to Q4 the SMID sector can provide growth and innovation.

Now in my general portfolio I am long large cap tech like AAPL, AMD, META, and semiconductor stocks. My core healthcare positions are in large cap biopharma and United Health (UNH).

We created this portfolio of well-known SMID stocks in January as the situation looked more optimistic when stocks took off from the October bottom. Yet small caps sunk after hitting short-term highs in early February. But biotech stocks can move a “different drummer’ and have recovered from March 2023 lows. We can always get news from deals, product breakthroughs, and a certain degree of independence from the MACRO. Hence the volatility.  The current portfolio picks shows this resilience al though the volatility can get you whipsawed. Here are some key takeaways from this portfolio performance:

1. Most of these stocks have outperformed the indices of the XBI, IBB, IWM, and IJR. Moreover, traders had chances to get out near the top. Major biotech ETFs drive the momentum of many of these stocks.
2. CRSPR is leader in gene-based medicines. CRSP took off this week gaining over 14% on upgrades and its extensive pipeline in oncology and blood disorders. Cash position near $2B is strong. The RSI jumped for 69 to 89.
3. Geron (GERN) made a nice move off the April bottom of $2.00 to a recent $3.10 and more Phase 3 data on their telomerase inhibitor imetalstat for hematologic malignancies will be presented in early June.
4. Quidel/ Ortho continued its choppy trading pattern since January but we like the management team to find new opportunities in clinical diagnostics and value from the Ortho merger. P/S is a low 1.85 with a P/FCF of 14.8.
5. The laggards YTD are  SUPN and VCYT. Steady less volatile are EVOL , HOLX. PACB is a long-read sequencing play.
6. We added Acumen (ABOS) to the portfolio last week. Acumen has a strong cash position and is a play in Alzheimer’s disease.

(Click on image to enlarge)

Portfolio published 1/20/23 all are holds or add-ons, XBI always subject to trading.

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Small & Mid Cap Life Science Stock Portfolio: Some Good Picks In A Stalled Sector
Healthcare Sector Update: MedTech Trending Up