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Rod Raynovich
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Rod Raynovich is an entrepreneur and executive with a focus on life science companies and medical technology trends.He has over 30 years executive experience including Abbott and JNJ and has been involved three successful start-ups. He has a B.S, from Penn State University and an MBA from... More
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Raygent Capital
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  • Fidelity Select Biotechnology Fund (FBIOX) Outperforms Biotech ETFs YTD  5 comments
    Sep 24, 2013 5:05 PM | about stocks: IBB, PBE

    Life Science Sector at or Near YTD and All Time Highs

    Fidelity Fund (MUTF:FBIOX) Outperform ETFs

    Over the past 3 years we reviewed how ETFs complement a biotechnology investment strategy and compared three of the largest and most liquid : FBT, IBB and XBI (see the articles below and our comprehensive article from May 2011).

    In an article on January 17,2013 , Biotech Bull Market: Are ETFs Better than Mutual Funds, we compared ETFs to Mutual funds and concluded that ETFs slightly outperformed mutual funds but recommended both. Since that time 8 months later, the five star Fidelity Select Biotechnology Fund (FBIOX $173) has pulled ahead up 6o% YTD, compared to FBT ($65.15) First Trust NYSE Arca Index Fund up 42% YTD, Biotechnology IBB ($208) iShares NASDAQ Biotechnology Index up 52% YTD and XBI ($131) SPDR S&P Biotech Index up 48.4% YTD.

    The IBB is the most liquid and largest ETF with an asset value of $3.55B. Next is the XBI with an asset value of $953M followed by the FBT with an asset value of $721M.

    Here is the one year chart showing the sector taking off in January 2013:

    Chart foriShares Nasdaq Biotechnology (NASDAQ:<a href='' title='iShares Nasdaq Biotechnology ETF'>IBB</a>)

    A smaller ETF the Power Shares Dynamic Biotech and Genome Fund (PBE $35) with $196M in assets has recently rocketed up 53.8% YTD, slightly outperforming the IBB. But given the momentum of the sector, and relatively small size of the fund, the PBE could just track larger cap winners to outperform. Without a detailed analysis note that the largest holding of PBE are the well known winners: GILD, ILMN, AMGN, REGN and BIIB. The fund is heavier in life science tools stocks such as : Illumina (NASDAQ:ILMN), Life Technologies (NASDAQ:LIFE), Sigma-Aldrich (NASDAQ:SIAL) and Waters (NYSE:WAT).

    Here is six month cart for IBB vs PBE. and PBE vs FBIOX.

    Chart forPowerShares Dynamic Biotech & Genome (NYSEARCA:<a href='' title='PowerShares Dynamic Biotechnology & Genome Portfolio ETF'>PBE</a>)

    Chart forPowerShares Dynamic Biotech & Genome (<a href='' title='PowerShares Dynamic Biotechnology & Genome Portfolio ETF'>PBE</a>)

    In summary our conclusions are the same as earlier articles we wrote:

    1. ) ETFs can be used to balance a biotechnology portfolio. If one is not knowledgeable in life science technology one or two ETFs can provide comparable returns as the bull is a sector run.

    2.) The Fidelity Select Biotechnology Fund (FBIOX) has outperformed ETFs particularly over the past month up 11%. The Fidelity Fund has lately become a little more aggressive with small and mid cap picks such as Aegerion (NASDAQ:AEGR) and Pharmacyclics (NASDAQ:PCYC).

    3.) A portfolio allocation of one ETF (IBB) and FBIOX should equal or beat other alternatives. However one should keep in mind that the bull market in biotech started in March 2009 and is over 4 years old.

    4.) Here is a summary of the Rayno Life Science Picks and Performance.

    Disclosure: I am long GILD, ILMN.

    Additional disclosure: Long FBIOX

    Stocks: IBB, PBE
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Comments (5)
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  • johnnyvolvo
    , contributor
    Comments (345) | Send Message
    Great info here. With the huge run up in biopharma stocks this year, and the somewhat frothy market levels, what do you see ahead for 2014?
    I would not expect the kind of growth we saw this year.
    I also think it might be expedient to wait for a better entry point on a fund like FBIOX.
    However, waiting for a better entry point would not have worked out to well this year, would it?


    Are we in multi-year bull market for biopharma stocks?
    I believe so, but I do not know this sector as well as energy or mining.
    17 Oct 2013, 11:29 AM Reply Like
  • Rod Raynovich
    , contributor
    Comments (68) | Send Message
    Author’s reply » There is a sell-off today as it is prudent to take some off after the huge runs. I see another rally in Dec.-Jan. time frame then only modest 10% gains for 2014. Big pharma stocks could do as well in 2014.
    6 Nov 2013, 10:48 AM Reply Like
  • tim126
    , contributor
    Comments (3) | Send Message
    hi Rod, Thanks for the information!
    I am thinking whether it is a good idea to purchase FBIOX and FUSEX (tracking S&P 500 index) now, and hold them for one to two years, and decide whether to sell or keep then?
    I really appreciate that you can share your view here!
    13 Nov 2013, 10:22 PM Reply Like
  • mike_simms
    , contributor
    Comments (123) | Send Message
    I invested in this fund just a few months ago, it has gone up 33% in less than 6 months. I am Impressed. I wish I had 10x as much.
    22 Jan 2014, 07:20 PM Reply Like
  • ritam2001
    , contributor
    Comments (408) | Send Message
    Just came across this article. I guess it was a WONDERFUL time to buy back then!!
    6 Mar 2015, 05:11 PM Reply Like
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