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Rayno Life Science Stocks At New Highs-Another Look At 5 Key Trends (#3)

|Includes: iShares Nasdaq Biotechnology ETF (IBB), XLV

Rayno Life Science Stocks Roll Merrily Along

IBB ($264.50)At New Highs Up 16.4% YTD

New Highs Today in Rayno Life Science Focus Stocks: Alkermes (ALKS $53), Alexion (ALXN $184), Amgen (AMGN $126), Biogen (BIIB$336) , Cubist (CBST $75.50), Gilead (GILD $84), Illumina (ILMN $170), Regeneron (REGN $334), Seattle Genetics (SGEN $52.85), and Thermo Fisher (TMO $124).

With a little help from NASDAQ (4272) up 0.68% and the Healthcare sector (up 1%) in general biotech stocks ignored the 2 hour sell-off last Friday and soared to new highs. No analysis needed as sellers are not around and institutions can move the sector at will. The acquisition of Forest Labs FRX up 27.5% by Actavis (NASDAQ:ACT) up 5%, may have brought more buyers to the sector. Some valuation numbers on Forest Labs (FRX $93.85) at current prices:

P/S 7.24, Forward PE 24.51, P/B 4.15, Cash/sh 46.23. Another Icahn activist win.

Green Day With Big Moves

Several weeks back we wrote about Five Key Trends to watch in the biotech bull market. Here is a quick review:

  1. Large Cap Biopharmaceuticals. Strong Bull intact new highs today.
  2. Key technicals with ETFs and FBIOX. New highs with IBB. Bull intact.
  3. Mid-cap emerging growth. Many new highs and momentum rules.
  4. Speculative small caps are much more volatile and can have huge moves up or down. Stay away unless you are a day trader/gamer/and have a penchant for speculation. Today PRANA (PRAN $10.10) was up 39% on 25.3M shares on clinical trial news for Huntington disease! (And the CSO of the Company also does the PR.) But there are plenty of story stocks headed south.
  5. Health care has strengthened overall with the XLV ($58.75) now up 6% YTD after being flat. If you rant against ObamaCare just buy the XLV because as the chart shows over 5 years the XLV is up 120% or 24.2% annualized through the political infighting of the Affordable Care Act (ACA). More patients are bullish for healthcare stocks.

Conclusion: No bear sightings. Hold the Rayno Portfolio. Keep 15% cash handy but what to sell? Re-balance up with FBIOX or IBB. Hedged shorting can also be dangerous. Valuations are not relevant.

Disclosure: I am long XLV.

Additional disclosure: I am long Fidelity FBIOX Fidelity Select Biotech Fund and short individual mid and small cap stocks on a daily basis.