We advised caution in our brief post last week avoiding new trades but recommend holding core positions in healthcare and biotech for a potential Q4 rally. This is a catch-up post looking for what may have missed over the past week. Normally the end of August is relatively quiet as earnings season is over and many fund managers are on vacation. Technicals rule in here as we are at Jan/Feb 2018 highs

FBT down 0.75% at $151.78, IBB down 0.58% at $117.32, XBI down 0.64% at $96.08

U.S. drug cost issues can pop up on the news at any time like proposals for negotiating Medicaid contracts now in Oklahoma.

Despite all the geopolitical cross currents the market finds new themes and a healthy rotation among sectors. Retail stocks shot up this month with the XRT at 2018 highs. Healthcare began a run in early July and the XLV is up 5% over one month beating the IBB down 0.7 % driven largely by large cap drug stocks. The more speculative XBI has also sold off over the past  month down 4.1% after peaking on June 20 at $101. The FBT is the leader up over 18% YTD at 2018 highs in the $91 range with better stock picks like the unique data sciences player IQV, NKTR, CELG, ILMN and CRL. The Company IQVIA Holdings is up 24.5% YTD and 11.6% since earnings beat in July.

The QQQ is up over 14% YTD to the $181 level after a brief dip at the end of July.

Our Mid-Cap Biopharma watch list shows recent weakness since the “blow-off” June 20 top but some stocks are near new 2018 highs : FMI (acquired by Roche), LGND, NBIX, NVCR, SGEN. Mid-caps near 52 week lows are: ACAD, CLVS, EXEL, FOLD, INCY, TSRO. We need to update this list but it can really show the volatility and risks of picking biotech stocks compared to ETFs with good algorithms for stock picking.

Gene editing stocks were extremely volatile on recent news  but well off 2018 highs: CRSP up 91% YTD, EDIT off 11.5% YTD, NTLA up 33% YTD.

The Medtech sector outperformed and is at new highs with many stocks up today. The Fidelity Select Medical Technology and Device Fund (FSMEX) is up over 23% YTD led by top holdings BDX, BSX, SYK, ISRG and BAX. Our past cardio pick CSII is near new highs at $39. The IHI iShares US Medical Devices ETF is up 20% YTD. 

We will do a major review of Diagnostics and Tools stocks but here are the Portfolio Picks from 2016. Personalized Medicine was the big theme with genetic tests and sequencing among the big winners: FMI, GHDX, QDEL, ILMN, TMO. Some big winners in the subsector YTD are: BDX, EXAS, MYGN, NEOG, NVTA, PKI, TECH ,TMO. The long term trend in new diagnostic and tools technologies is intact but more importantly shows the huge returns from holding stocks for the long term. e.g. BDX and ILMN

Exact Sciences (EXAS), the current fav of the momentum set, was up 4% to $67.98. The stock was $50 on Tuesday before a deal with Pfizer on a co-promotion of the lab test was announced. Looks like a short covering rally now with shorts down to 9% of float. The stock trades at a P/S of 23, PB of 11 and has sales growth Q/Q of 78.6% but with no EPS forecasted for next year.