John ZechnerIshares Nasdaq BiotechnologyIBBBUYJul 13, 2020
Healthcare sector outlook The sector has had a great bounce since March lows. A good way to play the COVID vaccine race. IBB is the best-known biotech ETF, but he does the XBI, because it's equal-weighted. XBI has had a great bounce. It's a great sector with reasonable valuations. The race for a COVID vaccine is a tailwind, of course. Biotech is a slow-growth area, which benefit from interest rates staying very low for the long term.
He likes big pharma with AbbVie his favourite name. Pipelines are starting to fill, and if rates hold and R&D gets cheaper, these stocks will continue to work.
He prefers to own individual names, but you need to own biotech, especially if there's a change in Washington (less regulation). It's very sensitive to interest rates, which will likely decline.
He likes biotech, focusing on longevity research. Better than owning a single biotech stock where you can lose 80% just on negative research findings. It's completely random--you have no idea what the outcome will be on these biotech products. Might as well own IBB and lessen risk.
He sold IBB last month, though he owns a lot of Regeneron (for its fundamentals) in the biotech space. You need to own individual names, not the macro in biotechs. But he could re-enter IBB when the time is right.
IBB vs. XLV XLV has done very well, and also well positioned for the type of market we're in right now. Cap weighted. A fine way to get pure beta in the sector. A better choice than IBB. IBB is much more concentrated with a higher risk in biotech. Smaller caps have lagged large caps since last year, to the tune of 50-60% relative performance, because of the impact of higher interest rates on growth, plus the FDA's become slower to approve new drugs.
IBB gives him exposure to Moderna, its largest holding, and yet there's no single-company risk here. Biotechs have been under a lot of pressure this year, so he sees an opportunity (past of the pressure has been from shorting) if you're patient. He likes the future of biotech.
(A Top Pick Jul 09/20, Up 14%) Still likes it, but took profits as the valuation was getting expensive, plus the shift from growth to value. Long term, lots of tailwinds.
(A Top Pick Jul 09/20, Up 6%) Sold in February, as he saw the writing on the wall with the rotation away from growth. Not cheap at 28x. Long-term, makes a lot of sense. Aging population, growing middle class in emerging markets will keep demand up.
Growth of biotech is expected to explode in a post-pandemic world. Longer term, aging population and growth of middle class are tailwinds. 27 bps expense ratio. Yield is 0.22%.
A very good biotech ETF. If you have it and you like it, stay with it. See what percentage of your portfolio it comprises. For a sector play, don't go above 5-6% of your portfolio. You want to invest in it, not day trade it with every move.
(A Top Pick May 06/19, Down 6%) What did not happen this year was there was not the usual seasonal uptick in June. A long term hold. He thinks biotech is the next wave that drives markets for the next generation. Everyone should own biotech in their portfolio.
Healthcare sector outlook The sector has had a great bounce since March lows. A good way to play the COVID vaccine race. IBB is the best-known biotech ETF, but he does the XBI, because it's equal-weighted. XBI has had a great bounce. It's a great sector with reasonable valuations. The race for a COVID vaccine is a tailwind, of course. Biotech is a slow-growth area, which benefit from interest rates staying very low for the long term.