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What the Big Trend in Biotech Looks Like

By Rob Fannon, editor Phase 1 Investor
Monday, March 9, 2009

The unique claim we made about biotech stocks isn't much of a claim anymore.
 
About a month ago, I wrote about the "defensive" characteristics the biotech sector has taken on in the past few years. For proof, I showed you how the S&P Biotech ETF (XBI) was actually up in price from February 2007 to February 2009.
 
It was an amazing accomplishment for what is normally considered one of the riskier sectors of the stock market. Real estate, oil stocks, tech stocks, gold stocks, and corporate bonds couldn't make that claim.
 
But have a look at an updated chart of the XBI:
 
 
 
Yep... the worst stock market since the 1930s has taken down the biotech bull market. The XBI is down a few percent in the past two years.
 
Other biotech ETFs – like the PowerShares Dynamic Biotech & Genome Portfolio (PBE) and the Biotech iShares (IBB) – are at new lows as well. All biotechs are "swimming upriver" right now. Even the best and strongest, like Celgene and Genzyme, are at multiyear lows.
 
Of course I'd like to see biotech stocks running higher and higher each day. That makes my job much easier. But I've got to set my bias aside and objectively look at the facts. And the facts are biotech is struggling right now… not nearly as much as highly leveraged retailers, real estate developers, and banks, but struggling nonetheless.
 
So if you're interested in biotech stocks how do you play this weakness? I'd avoid the ETFs for now. Only true big hits will do well in this environment. (Here are three areas to look for the next biotech blockbuster.)
 
The big trend in biotech isn't down… but it isn't "up" anymore. Consider shorting the weakest of the bunch and stick to the hottest areas for your long bets.
 
Good investing,
 
Rob Fannon




In The Daily Crux Recent Articles
Market Notes
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Mall REITs make another leg down... Simon Property and Macerich hit new lows.
 
In the Crux... Major world currency is on the precipice.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1221.53 +1.3% +10.1%
Oil 38.31 +1.4% -0.6%
Gold 138.07 +2.1% +16.3%
Silver 28.60 +2.4% +53.6%
US-Dollar 80.67 -0.8% +8.1%
Euro 1.32 +0.6% -12.1%
Volatility 18.01 -7.1% -19.8%
Gold Stocks 581.56 +3.0% +17.0%
10-Year Yield 3.02 +0.7% -10.7%

World ETFs
Symbol Price
Change
52-Wk
USA 122.89 +0.3% +11.3%
Canada 30.50 +0.2% +16.2%
Russia 21.94 +1.4% +18.1%
India 37.85 +0.3% +22.3%
Israel 16.69 +1.3% +10.8%
Japan 10.64 +0.6% +6.5%
Singapore 13.73 -1.1% +18.8%
Taiwan 14.78 +0.4% +19.2%
S. Korea 57.31 +1.3% +23.4%
S. Africa 71.87 +1.4% +28.2%
China 44.42 -1.4% -0.6%
Lat.America 53.17 +0.7% +8.4%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 137.59 +1.0% +18.9%
Big Pharma 64.14 +0.0% -3.2%
Internet 72.07 -0.1% +23.4%
Semis 16.22 +1.2% +29.4%
Utilities 31.28 +0.2% +1.5%
Defense 18.52 +0.1% +10.6%
Nanotech 10.03 +0.4% +1.6%
Alt. Energy 10.08 +1.3% -3.3%
Water 18.49 +1.0% +14.5%
Insurance 16.14 +0.4% +21.1%
Biotech 20.54 -0.2% +28.1%
Retail 19.70 +0.3% +30.2%
Software 24.79 +0.8% +25.9%
Big Tech 53.87 +0.3% +22.7%
Construction 13.10 +0.9% +15.7%
Media 13.64 +0.5% +26.0%
Consumer Svcs 67.39 +0.2% +24.5%
Financials 55.04 +0.3% +7.4%
Health Care 64.30 +0.1% +2.0%
Industrials 63.54 +0.5% +21.0%
Basic Mat 74.35 +1.1% +25.3%
Real Estate 55.32 +0.1% +25.0%
Transportation 91.77 +0.7% +26.9%
Telecom 22.59 +0.5% +17.8%