iShares Nasdaq Biotechnology ETF In Play With M&A Activity And Upcoming Earnings Date

| About: iShares Nasdaq (IBB)
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Several upcoming events are making biotechnology stocks more attractive for investors. Investors are placing more money into biotechnology stocks with hopes of investing in the next big drug or technology that could reward their portfolios. The rise in share prices is linked to the recent and upcoming merger and acquisition activity, and several upcoming IPOs.

The easiest way to play the biotechnology sector is investing in the iShares Nasdaq Biotechnology ETF (NASDAQ:IBB). With $3.6 billion in assets, the ETF is the largest pure play on the sector. The fund holds 125 different stocks, representing top holdings of companies with proven drugs and smaller positions in promising high reward companies. The fund has seen its shares run up to fifty-two week highs as new money pours into the fund. Here is a look at the top ten holdings of the ETF (as of 07/18):

  • Celgene: 8.0%
  • Gilead Sciences: 7.9%
  • Amgen: 7.7%
  • Biogen: 7.0%
  • Regeneron: 6.8%
  • Alexion: 4.3%
  • Vertex: 4.0%
  • Life Technologies: 3.6%
  • Mylan: 3.4%
  • Onyx Pharmaceuticals: 2.6%

Of particular note is two of the top ten holdings, which are both in current buyout rumors. Alexion (NASDAQ:ALXN) shares have shot up 27% in the last month as companies continue to circle the potential buyout favorite. With a weighting of over 4%, investors in the ETF could see a nice boost from a premium buyout of Alexion.

The other buyout target is Onyx Pharmaceuticals (NASDAQ:ONXX). In fact, Onyx turned down a $120 buyout offer. Shares shot up to $136 on rumors of higher bids, but have now settled back down to the $126 level. Plenty of upside remains for shares and the ETF if a higher buyout offers comes in. Without a buyout offer, I still am bullish on shares of Onyx Pharmaceuticals and named the company to my annual top ten stocks list. I see the company moving up the top ten list over the next several years.

More noteworthy is the upcoming date of July 25th. That day marks second quarter earnings for four of the top ten holdings in this ETF. Alexion, Biogen (NASDAQ:BIIB), Celgene (NASDAQ:CELG), and Gilead (NASDAQ:GILD) all report earnings. The total weighting of these four stocks is 27.2%, representing a possible huge trading day for the ETF. Here is a better look at those four earnings reports.

Alexion Pharmaceuticals

Share Price: $112.17

52 Week Range: $81.82-$125.65

YTD Return: +12.1%

Earnings Estimate: $0.68

Revenue Estimate: $365.0 million (+32.9%)


Share Price: $230.27

52 Week Range: $134.00-$242.64

YTD Return: +53.5%

Earnings Estimate: $1.93

Revenue Estimate: $1.62 billion (+13.8%)


Share Price: $135.89

52 Week Range: $63.89-$137.80

YTD Return: +67.6%

Earnings Estimate: $1.44

Revenue Estimate: $1.54 billion (+12.7%)

Gilead Sciences

Share Price: $60.10

52 Week Range: $25.40-$60.10

YTD Return: +60.1%

Earnings Estimate: $0.50

Revenue Estimate: $2.66 billion (+10.6%)

As you can see, all four of these companies reporting have had dramatic share price increases. The companies are also all expected to post double digit revenue growth in the second quarter. If the results are positive, this ETF will hit new highs. If earnings come in below estimates for any of the four big names, investors could see great buying points on individual stocks or the ETF as a whole. Consider adding this ETF to your portfolio to get exposure to the hot biotechnology sector.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.