Biotech Bear Market in the Rear View Mirror
The biotech sector continues to strengthen and the recent rally is spreading out to the small cap stocks within the sector. The positions within the Biotech Gems portfolio had another strong performance in the holiday-shortened week. Our portfolio has made up a lot of ground in November and I look forward to seeing more green arrows through year end.
Performance Update:
I reviewed our portfolio at the close of trading on Friday. The portfolio has made great strides since the sector hit a bear market bottom late in September. The overall biotech sector is down .87% since the start of May when we launched Biotech Gems not accounting for dividends. This is using the iShares Nasdaq Biotechnology ETF (NASDAQ: IBB) , the largest ETF focused on the biotech sector with almost $9 billion in assets.
Our large cap core positions in contrast are now up 3.86% while our small cap portion of our portfolio is down 4.40%, both not including dividends. Using the minimum 50% allocation recommended to our core positions gives us a blended loss of .27%, 60 basis points above our benchmark. The most conservative allocation of 75% dedicated to the large cap core positions results in a gain of 1.79%, 266 basis points above the benchmark.
Portfolio Update:
Relypsa (NASDAQ: RLYP), Synthetic Biologics (NASDAQ: SYN) and Xencor (NASDAQ: XNCR) which made the best performers list last week did so once again this week. All of these stocks were up better than 10% this week. Synthetic received another key patent this week and the amount of hedge funds holding the shares increased 50% in the third quarter according to recent filings. I could find no news to account for Xencor’s rise this week. Even with the recent rally the shares are down some 30% from 52-week highs so hopefully more upside lies ahead. Relypsa continues to benefit from the high price paid for competitor ZS Pharma (NASDAQ: ZSPH) by AstraZeneca (NYSE: AZN) earlier in November.
Tracon Pharmaceuticals (NASDAQ: TCON) was our big winner rising some 25% on the week. I wish I knew what was behind the move but am happy to see the stock rally. The company did present at the Stifel Nicolaus Healthcare Conference last week. Oppenheimer also reiterated a Buy rating and a whopping $26.00 a share price target on Tracon on November 11th.
We will see if the recent strength in the biotech sector can make it three big weeks in a row when trading resumes Monday. It does seem the bear market in the sector is now solidly in the rear view mirror. However, the sector is still far below its highs it reached in July before the area had a substantial pull back which could mean further upside in December.