Stocks Are “Un-Analyzable” Amidst Political Distractions 

It is getting harder to find trades and identify long term investments in healthcare and biotechnology. While we are still in a trading range since the election and off the recent bottom hit before the election, we are unable to get traction on the upside. Stocks are trading by sector moving with the political winds of the week now made worse by the immigration chaos. Industrial and material stocks have rallied since the election on the belief that government would invest in infrastructure projects. Energy stocks are up because of favorable policies enunciated by the new administration such as less environmental regulation. Deregulation and tax cut themes are wearing thin. Fixed income has been crushed by higher interest rates and a shift to equities.

Healthcare stocks have still not recovered from the January 12 Trump Tweet. on drug prices and the sector is being avoided. Bottom feeding on large cap biopharma is still risky. We are maintaining a core biotech position of about 10% in our portfolios with the expectation that a sector shift will come. Here is my take:

• Technicals–three month range is holding at mid levels IBB range 263-286; XBI range $58-65; XLV range $68-71 but stable with 2% dividend.
• Earnings-both Abbvie (ABBV) and Celgene (CELG) took a slight hit on earnings so better to wait for new large cap  buys until all earnings get reported. Abbvie (ABBV) WW revenues grew 6.9% for Q4 and global HUMIRA sales grew 15.5%. GAAP diluted guidance for 2017 is $4.55-4.65. Q4 earnings matched but revenues missed by $0.4B. Celgene (CELG)  beat Q4 earnings with full year of $2.49 on revenue of $1.18B and kept guidance. Revlimid blood cancer drug  grew 16% to $1.808B. Sales of other drugs Otezla and Pomalyst were also expanding rapidly. Investors may have expected higher 2017 guidance for Celgene  than  $7.10-7.25.
• M&A-is a positive trend for the sector. Recently JNJ Actelion for $30B for a rare disease portfolio to help earnings with patent expiration of Remicade.
• Sentiment remains terrible and political chaos has distracted the market from financial results and clinical news. And market commentary from POTUS has begun to question the rally.

Action: None. Hold current portfolio and look for new buys as we get through earnings season and any Nasdaq correction.