Monday, October 8, 2012
Another month... another new high in biotech.
Regular readers know we've been keeping close tabs on the monster uptrend in the "boom or bust" sector. If you're still long, congratulations, you're still making money. On Friday, the Nasdaq Biotech Index hit an all-time high.
If you missed this run, don't worry. The same "big picture" trend that's driving biotech higher is also boosting another area of the market. And there could be much more to come...
Longtime Stansberry & Associates readers know we think the "big picture" is favorable for health care. Aging Baby Boomers will keep demand for health services high... And "Obamacare" could produce even more demand.
That's great news for the small, speculative biotechs seeking the next great blockbuster drug. But it's also great news for the Big Pharma companies and their stable of treatments... health insurers... pharmacy benefit managers (PBMs)... and anyone who has a piece of the health care pie.
Many of these stocks have already seen impressive moves higher. Take Eli Lilly (NYSE: LLY) for example. It's up 20% in the last six months. Mega blue-chip Pfizer is up 16%. Express Scripts, a major PBM, is up 14%. Big biotech Gilead Sciences is up 46%. But they're still reasonably priced. None of them is trading for more than 16 times forward earnings.
These are a few of the top names in the ProShares Ultra Health Care Fund (NSYE: RXL). This fund offers traders a "one click," leveraged way to profit on the big trend in health care.
In summer 2011, this fund suffered a big selloff (like most assets). But last August, it began a huge run higher. And last week, it hit an all-time high.
After such a big run, the sector is due for a pullback. But it's been in that "due for a pullback" condition for a few months now. When a strong trend like this takes hold, there's no saying how high it can go.
In sum, the sector is still relatively cheap. The trend has a strong demographic tailwind. Stay long health care. If you're not in yet, get long.
Amber Lee Mason and Brian Hunt
Our colleague Steve Sjuggerud has been following the big trend in health care for more than a year now. In August, he updated his thoughts. "Right now, we have the ability to buy the planet's greatest names in health care at valuations not seen in at least 30 years," he wrote. "The last time they were this cheap, they soared over 600% in six years." Get the full story here: Missed the Move in Health Care? There's Still a Triple-Digit Trade.
If you don't want to buy here because RXL is already hitting new highs, you've got the wrong idea. "What is your evidence that says [stocks] go down once they hit new highs?" Steve asks. "History actually says the opposite..." Read more here.
Oil is the worst-performing major commodity so far in 2012... prices are down almost 10%.
Biotech boom shows no signs of stopping... Big fund IBB breaks out to a fresh all-time high.
U.S. banks stage a "bad to less bad" recovery... JP Morgan, Citigroup, and Bank of America surge 20%-plus over the past three months.
Industrial conglomerate 3M breaks out to a new 52-week high.