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:
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.
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 (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.
Additional disclosure: Long FBIOX