Part 1 Biopharmaceutical Stocks-New Highs Were Hit on December 10
Five Straight Years of Gains in Biotech-the IBB is up 292% since Dec 18, 2009
Biotech stocks are following the long term seasonal bullish trend surging in Q4 and up about 49 % YTD. The easiest way to invest in the biotech market is with the ETF First Trust NYSE Arca Biotechnology Index (NYSEARCA:FBT). Another ETF the SPDR S&P Biotech (NYSEARCA:XBI) is up 42% YTD and during market surges can outperform the FBT. The IBB is up 36.5% YTD. If you prefer actively managed funds the Fidelity Select Biotechnology Fund (MUTF:FBIOX) also tracks the XBI and IBB but be careful in December because mutual fund dividends are declared and taxable if not in tax deferred accounts.Although the market has surged to new highs this week the action has been a little choppy with a lot of volatility in individual stocks.
We have created three stock motifs for biopharmaceutical investing all of which are among our portfolio picks.
Rayno Large Cap Biopharmaceutical Portfolio
Our favored core portfolio consist of large caps including FBT. The large cap portfolio selections are : Alexion Pharmaceuticals (NASDAQ:ALXN), Amgen Inc. (NASDAQ:AMGN), Biogen Idec Inc.(NASDAQ:BIIB), Gilead Sciences (NASDAQ:GILD), Regeneron Pharmaceutical (NASDAQ:REGN) and Roche Holding Ltd ADR (OTCQX:RHHBY). All of these stocks with the exception of FBT and RHHBY were in our original portfolio in 2008-9. The bull market in biotechnology began in March 2009 coinciding with ObamaCare initiatives. By the end of 2010 the biotech bull market was well under way. The Rayno Large Cap Portfolio is up 39% YTD.
Here is the Rayno Biopharmaceutical Portfolio at the end of 2012. Biogen Idec was $49 and Gilead was $35 at March 2009 bottom!
Rayno Mid Cap Biopharmaceutical Portfolio
Over the past two years as funds moved more money into biotech the big winners have been in the mid cap area, about $5-10B in market capitalization originally. Our current mid cap picks are: Alkermes (NASDAQ:ALKS), Cubist (CBST), Pharmacyclics (NASDAQ:PCYC) and Seattle Genetics (NASDAQ:SGEN) and Vertex Pharmaceuticals (NASDAQ:VRTX) up 62% in 2014. Some of our mid cap picks were acquired such as Cubist recently and Cephalon in 2013. The Rayno Mid Cap Portfolio is up 33% YTD.
Rayno Small Cap Speculative Picks
Last August and again in October we added several small cap "trades" based on the assumption that many smaller caps were beaten down after the February 2014 "bubble" top and were due for a rally in Q4. All have been good trades but extremely volatile. The winners were Celldex Therapeutics (NASDAQ:CLDX) and GlycoMimetics Inc.(NASDAQ:GLYC). The loser was FibroCell Sciences (NASDAQ:FCSC).
Have a look at the 2013 year end performance of Rayno Biopharmaceutical picks. 2013 was a huge year for biotech with the IBB up 65% and that was before the huge run-up in Jan/Feb 2014. Four companies on our list were acquired: Astex, Cephalon, Optimer, and Viropharma.
Expect bullish action though the JPMorgan Conference in mid January as there is potential for product news and M&A.
Part 2 will focus on Rayno Diagnostics and Tools stocks.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: Long FBIOX