|Written by GSCR Staff|
|Thursday, 17 April 2014 07:24|
2014 has not been a kind year to the small cap biotech sector, a staple of the space. Figure 1 below says it all illustrating a sample of ETF from different fund companies. What was hot in 2013 is cold in 2014.
Figure 1: Sample Biotech ETF 2013 and 2014 Returns, Technical Outlook
Similarly, Figure 2 shows a sample of three picks from our Market Monitor in 2013 which were made in the first quarter (LCI), second quarter (ACAD) and fourth quarter (CYCC) of last year. We just flat whiffed on CYCC.
Figure 2: Sample Biotech Picks from Market Monitor in 2013, Technical Outlook
Both charts indicate a phenomenon that is occurring in the greater market right now, a transition away from the easy money technical trade to a fundamental, value, company evaluation for stocks.
Here is our take on biotech stocks. If you want to lock in profits, by all means now may be the time to do it with an outright sell or with covered call options. However, there is still some long term value in the oncology segment of the sector for those who have the stomach for a rough 2014. At the end of the day, burn rate, clinical trial success, and management experience and track records are still strong indicators of how well these stocks will perform. Keep watching the Market Monitor for ideas because the next big ‘cure’ is out there and needs investors!
Have a great day and Happy Easter!
Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.
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