One Day Away from a New President
“Poetry is about the grief. Politics is about the grievance.” – Robert Frost
We are finally just one day away from the election, and hopefully some normalcy will return to the markets soon thereafter, especially on the beaten down biotech sector which has taken a thrashing over the past five weeks or so.
That decline continued last week despite a nice rally on Friday. There are several reasons I believe that last Thursday might mark the bottom of this five week pullback. We bounced off a long-term support level on Friday and the three percent plunge Thursday did have more of a whiff of panic selling that usually marks the bottom of a bear market.
If the election results in a split government as I suspect, we should get a decent rally into the end of the year. This will especially be true if Republicans retain both the House and Senate as the more populist voices in Congress will be effectively sidelined from pushing additional legislation on the already beleaguered biotech and pharma industries. Investment sentiment might also improve overall once we get a very contentious and nasty election season behind us.
Performance Update:
Our benchmark the iShares Nasdaq Biotechnology (NSADAQ: IBB), the largest ETF focused on the biotech sector with almost $9 billion in assets, is now down 26.83% since we launched the Biotech Gems service at the start of May of 2015.
Our large cap core positions are down 13.03% on average while our small cap portion of our portfolio is now down 15.97% on average, both not including dividends. Using the minimum 50% allocation recommended to our core positions gives us a blended loss of 14.50%, 1,233 basis points above our benchmark. The most conservative allocation of 75% dedicated to the large cap core positions results in a loss of 13.77%, 1,306 basis points above the benchmark.
Portfolio News:
Mylan (NYSE: MYL) and Teva Pharmaceuticals (NASDAQ: TEVA) both fell hard on the back of the DOJ leak about their investigation into collusion and drug price fixing on Thursday. They all had good rallies on Friday as investors start to factor in that this contained at least a little bit of election posturing. If we do get a split government on November 9th, I would expect some strength from this beleaguered sub-sector. Celgene (NASDAQ: CELG) and Gilead Sciences (NASDAQ: GILD) held up very well during the down week among our core positions.
Eagle Pharmaceuticals (NASDAQ: EGRX) had a huge week and rocketed up some 25%. This week it was announced that the Centers for Medicare & Medicaid Services has established a unique, product-specific billing code, or J-code for their BENDEKA injection. The J-code will become effective on January 1, 2017. This should help boost sales of this compound, which is marketed and distributed by partner Teva Pharmaceuticals.