Biotech has been a great performer since I suggested it as a contrarian play on October 11-12 in my MarketWatch column and in my newsletter here.
* The SPDR S&P Biotech fund (XBI) is up 22.8%, and the iShares NASDAQ Biotechnology Index (IBB) has advanced 19.8%. The S&P 500 is only up 6.4%.
* The seven stocks I singled out for you in that column have done even better. They are up 26.6%.
But what to do now? My take: Stay in biotech for more upside, and consider buying if you have no exposure. Though the “easy” money has been made, biotech can go higher from here for three reasons.
1. Washington, D.C. is on hold.
Washington is very focused on impeachment and trade talks. Drug pricing and Medicare for All are not in the picture. That will change as the 2020 elections heat up, but for now drug price regulation is off the radar.
2. Continuing optimism ahead of Woodstock for Biotech.
The 38th Annual J.P. Morgan Healthcare Conference January 13-16 in San Francisco is one of the key events in the sector. It can generate a lot of investor interest because companies pitch their stories.
3. More M&A.
The turn of the year can be a good time for mergers and acquisitions. Already we have seen quite a few, suggesting there’s a trend in place.
So far this fall, six of my favorite biotech names in my stock letter have been bought out for nice gains. Medicines Company (MDCO) and Dova Pharmaceuticals are being purchased by Novartis (NVS) and Orphan Biovitrum (SOBIV.ST). XACT Sciences (EXAS) closed its purchase of Genomic Health. And Audentes Therapeutics (BOLD) is being bought by Astellas (ALPMY). Alder BioPharmaceuticals (ALDR) and Achillion Pharmaceuticals (ACHN) were also bought out.
These were all enormous winners for my subscribers. Three of these names advanced 100% to 400% some in less than a year. Two were up 78%-89% in a single day. One was up 66% in four months after I suggested it.
For insights on other biotech names that are about to get bought out, or will otherwise perform well because of underlying research trends, consider subscribing to my stock letter here.