Earnings Parade Kicks Off This Week
It was another volatile week for the market. However, thanks to the broad based rally on Friday, the S&P actually posted a slight gain for the week. It was the first weekly gain in trading so far in 2016, and it was most welcome. Friday’s rally was triggered by a big gain in the price of crude oil that day, no small part of which was due to the huge snowstorm that swept across the Midwest and Northeast. The high yield credit markets also stabilized some this week which was a positive. Strong manufacturing and housing reports on Friday also played their part.
Performance Update:
Biotech posted slight gains along with the general market this week. Our portfolio had a stronger week than the overall biotech sector as both our average large cap and small cap position was up approximately two percent on the week. The Biotech Gems portfolio continued to add to its outperformance against its benchmark this week. Our benchmark again as it has been since launch is the iShares Nasdaq Biotechnology ETF (NASDAQ: IBB), the largest ETF focused on the biotech sector with almost $9 billion in assets. This benchmark is now down 16.27% since we launched the Biotech Gems service at the start of May of 2015.
Our large cap core positions are down just 1.93% on average while the small cap portion of our portfolio is now down 20.86% on average, both not including dividends. Using the minimum 50% allocation recommended to our core positions gives us a blended loss of 11.40%, 487 basis points above our benchmark. The most conservative allocation of 75% dedicated to the large cap core positions results in a loss of 6.66%, 961 basis points above the benchmark.
Portfolio News:
Mylan (NYSE: MYL) continues to rebound from oversold levels and was the strongest of our large cap, core positions. The stock posted gains north of six percent this week. Tracon Pharmaceuticals (NASDAQ: TCON) and Synthetic Biologics (NYSE: SYN) were two of our best performing small cap holdings for the week. The latter announced encouraging Phase II trials results for its compound SYN-010 for the treatment of irritable bowel syndrome with constipation which met its primary endpoint in the tests.
Coming Attractions:
The earnings parade kicks off this week for our large cap core positions. I expect solid results overall and will be looking forward to reading through conference call transcripts. AbbVie (NYSE: ABBV), Amgen (NASDAQ: AMGN), and Biogen (NASDAQ: BIIB) report numbers in the upcoming week. Gilead Sciences (NASDAQ: GILD) and Mylan will report in early February. I will be also be looking to see if the IBB can close above $300.00 sometime in the coming weeks. This was the floor of the previous 10 week trading range that existed until big downturn that began 2016. A close above this level would be positive from a technical perspective.