Post by stcks on Sept 19, 2018 4:43:47 GMT
⚠️ Warning: You can read this article from SA. But don't sell any biotech stocks or the SEC will come after you. Even if you don't sell any, make sure that no one you ever done business with sells. This article can be dangerous.
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Can Biotech Continue This Rally?
Options Markets
Sep. 18, 2018 5:26 PM•xbi
Summary
seekingalpha.com/article/4207049-can-biotech-continue-rally
Biotechnology stocks continue to press forward in their impressive 2018 rallies.
Exchange-traded funds play a special role in the ability of investors to build stable exposure to this complex (and potentially volatile) space.
The SPDR S&P Biotech ETF is showing YTD gains of 11.52%, which firmly outpaces the gains visible in the S&P 500.
Recent earnings performances from the fund's largest holdings support the continued bullish stance for the ETF.
Biotechnology stocks have had an impressive year so far in 2018, and the SPDR S&P Biotech ETF (XBI) continues to outperform the bull rallies shown in the S&P 500. As a complex and volatile sector, exchange-traded funds play a special role in the ability of investors to build stable exposure to the space. XBI is currently showing YTD gains of 11.52%, which firmly outpaces the 8.05% gains visible in the S&P 500.
This strong momentum is being confirmed by the earnings performances within the fund's largest holdings, and this supports the continued bullish stance for investors considering "buy" positions in this well-diversified biotech ETF.
(Source: ETFdb.com)
Since it is critical to identify protective, diversified asset instruments, it is clear that XBI offers some interesting advantages for investors looking to build exposure to the space. XBI is almost entirely centered around U.S. companies, but those companies are associated with a broad range of market capitalizations in order to ensure relative stability and the potential for growth at the same time.
Small-cap stocks make up the largest segment, at 37% of the total holdings. This exposure is then balanced with mid-cap and large-cap stocks (which make of a combined total of 34% of the fund). This is an attractive mix, as it suggests the fund is still capable of growth and expansion going forward.
(Source: SPDRs.com)
The top 10 XBI stocks comprise roughly 16.4% of the fund holdings, which is far below the similar assessments in the iShares NASDAQ Biotechnology ETF (IBB). The top 10 holdings in IBB make up more than 55% of the total fund holdings, which makes it a much less diversified (and riskier) instrument for prospective investors.
Furthermore, when we are dealing with a sector like biotechnology (which is still rallying strongly), valuation becomes even more important than it is under more "normal" market conditions. XBI's price-to-earnings ratio currently stands at 21.29 (which is firmly below the average for its sector), and its price-to-book ratio stands at an attractive 5.51.
(Source: Author)
Of course, even with 118 total holdings, individual stock performance remains critical. The largest XBI holding is Intercept Pharmaceuticals (ICPT) at 2.08% of the fund. The company released its most recent earnings report on August 2nd, posting -2.58 in EPS for the quarter and beating analyst EPS forecasts of -2.83 by 8.83%.
Quarterly revenues of $43.58 million surpassed analyst forecasts by $2.39 million, and this represents an annualized increase of 41.1%. For the full-year period, analysts expect Intercept Pharmaceuticals will post -10.86 in earnings per share.
(Source: Author)
Sarepta Therapeutics, Inc. (SRPT) makes up the second-largest XBI holding, at 2.05% of the fund. Sarepta posted EPS losses of -0.43 cents during the second quarter, which was an improvement on the -0.48 EPS loss and a slight beat on the market forecasts. Revenues came in at $73.5 million, which was a 13.8% gain relative to the first quarter and more than double the $35.0 million posted during the same period last year. The company's better figures were driven primarily by rising demand for Exondys 51.
Operating expenses tied to research and development costs rose 62.7% (at $57 million), due to pipeline expansion, rising patient enrollment for Sarepta's late-stage studies, and collaborative utrophin platform costs. Current guidance shows that Sarepta expects revenues of $295-305 million for the full-year 2018 period.
(Source: Author)
Ligand Pharmaceuticals (LGND) is XBI's third-largest holding, making up 1.70% of the fund. Ligand reported quarterly earnings on August 6th and showed an impressive 2.59 EPS for the period. This was a massive beat on the 0.93 EPS expected by analysts and the 0.67 EPS posted by Ligand during the same period last year. This follows the 21% earnings surprise that was posted by the company for the first quarter, and Ligand has now beaten the consensus EPS estimates for four straight quarters.
Ligand's revenue figure also came in strongly at $90.04 million for the quarter. This represents revenue growth of 221.6% relative to the $28 million which was posted during the same period last year. The stock has surged by 85.3% so far this year, without much to be seen in terms of downside price corrections.
Since Ligand has also surpassed revenue estimates in each of the last four quarters, there is scope for downside retracement if the company is unable to live up to these lofty expectations in the quarter ahead. For the third quarter, Ligand is expected to post EPS of 1.12 on revenues of $43.29 million. For the fiscal year, the company is expected to show EPS of 4.93 on revenues of $208.76 million.
(Source: Author)
Overall, these are strong performances which have justified the rallies higher in the XBI ETF, which has had an orderly run higher after hitting its long-term lows in 2016. These types of moves can make it difficult for investors to position from the long side, as value opportunities have been few and far between. It should be said that the fund has consistently obeyed moving average support since the beginning of 2017, and this looks to be a good way of identifying pullback opportunities to start building new long positions.
Altogether, the strong momentum in share prices has been validated by the fund's largest holdings, and this supports the bullish stance for this well-diversified biotech ETF.
Thank you for reading. Please click the "Follow" button to receive more real-time investment alerts from Options Markets. If you found this article interesting (even though it may disagree with your position), please click the "Like" button at the top of the page.
Now, it's time to make your voice heard. Reader interaction is the most important part of the investment learning process! Comments are highly encouraged. We look forward to reading your viewpoints on XBI.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
——————————————————————
Can Biotech Continue This Rally?
Options Markets
Sep. 18, 2018 5:26 PM•xbi
Summary
seekingalpha.com/article/4207049-can-biotech-continue-rally
Biotechnology stocks continue to press forward in their impressive 2018 rallies.
Exchange-traded funds play a special role in the ability of investors to build stable exposure to this complex (and potentially volatile) space.
The SPDR S&P Biotech ETF is showing YTD gains of 11.52%, which firmly outpaces the gains visible in the S&P 500.
Recent earnings performances from the fund's largest holdings support the continued bullish stance for the ETF.
Biotechnology stocks have had an impressive year so far in 2018, and the SPDR S&P Biotech ETF (XBI) continues to outperform the bull rallies shown in the S&P 500. As a complex and volatile sector, exchange-traded funds play a special role in the ability of investors to build stable exposure to the space. XBI is currently showing YTD gains of 11.52%, which firmly outpaces the 8.05% gains visible in the S&P 500.
This strong momentum is being confirmed by the earnings performances within the fund's largest holdings, and this supports the continued bullish stance for investors considering "buy" positions in this well-diversified biotech ETF.
(Source: ETFdb.com)
Since it is critical to identify protective, diversified asset instruments, it is clear that XBI offers some interesting advantages for investors looking to build exposure to the space. XBI is almost entirely centered around U.S. companies, but those companies are associated with a broad range of market capitalizations in order to ensure relative stability and the potential for growth at the same time.
Small-cap stocks make up the largest segment, at 37% of the total holdings. This exposure is then balanced with mid-cap and large-cap stocks (which make of a combined total of 34% of the fund). This is an attractive mix, as it suggests the fund is still capable of growth and expansion going forward.
(Source: SPDRs.com)
The top 10 XBI stocks comprise roughly 16.4% of the fund holdings, which is far below the similar assessments in the iShares NASDAQ Biotechnology ETF (IBB). The top 10 holdings in IBB make up more than 55% of the total fund holdings, which makes it a much less diversified (and riskier) instrument for prospective investors.
Furthermore, when we are dealing with a sector like biotechnology (which is still rallying strongly), valuation becomes even more important than it is under more "normal" market conditions. XBI's price-to-earnings ratio currently stands at 21.29 (which is firmly below the average for its sector), and its price-to-book ratio stands at an attractive 5.51.
(Source: Author)
Of course, even with 118 total holdings, individual stock performance remains critical. The largest XBI holding is Intercept Pharmaceuticals (ICPT) at 2.08% of the fund. The company released its most recent earnings report on August 2nd, posting -2.58 in EPS for the quarter and beating analyst EPS forecasts of -2.83 by 8.83%.
Quarterly revenues of $43.58 million surpassed analyst forecasts by $2.39 million, and this represents an annualized increase of 41.1%. For the full-year period, analysts expect Intercept Pharmaceuticals will post -10.86 in earnings per share.
(Source: Author)
Sarepta Therapeutics, Inc. (SRPT) makes up the second-largest XBI holding, at 2.05% of the fund. Sarepta posted EPS losses of -0.43 cents during the second quarter, which was an improvement on the -0.48 EPS loss and a slight beat on the market forecasts. Revenues came in at $73.5 million, which was a 13.8% gain relative to the first quarter and more than double the $35.0 million posted during the same period last year. The company's better figures were driven primarily by rising demand for Exondys 51.
Operating expenses tied to research and development costs rose 62.7% (at $57 million), due to pipeline expansion, rising patient enrollment for Sarepta's late-stage studies, and collaborative utrophin platform costs. Current guidance shows that Sarepta expects revenues of $295-305 million for the full-year 2018 period.
(Source: Author)
Ligand Pharmaceuticals (LGND) is XBI's third-largest holding, making up 1.70% of the fund. Ligand reported quarterly earnings on August 6th and showed an impressive 2.59 EPS for the period. This was a massive beat on the 0.93 EPS expected by analysts and the 0.67 EPS posted by Ligand during the same period last year. This follows the 21% earnings surprise that was posted by the company for the first quarter, and Ligand has now beaten the consensus EPS estimates for four straight quarters.
Ligand's revenue figure also came in strongly at $90.04 million for the quarter. This represents revenue growth of 221.6% relative to the $28 million which was posted during the same period last year. The stock has surged by 85.3% so far this year, without much to be seen in terms of downside price corrections.
Since Ligand has also surpassed revenue estimates in each of the last four quarters, there is scope for downside retracement if the company is unable to live up to these lofty expectations in the quarter ahead. For the third quarter, Ligand is expected to post EPS of 1.12 on revenues of $43.29 million. For the fiscal year, the company is expected to show EPS of 4.93 on revenues of $208.76 million.
(Source: Author)
Overall, these are strong performances which have justified the rallies higher in the XBI ETF, which has had an orderly run higher after hitting its long-term lows in 2016. These types of moves can make it difficult for investors to position from the long side, as value opportunities have been few and far between. It should be said that the fund has consistently obeyed moving average support since the beginning of 2017, and this looks to be a good way of identifying pullback opportunities to start building new long positions.
Altogether, the strong momentum in share prices has been validated by the fund's largest holdings, and this supports the bullish stance for this well-diversified biotech ETF.
Thank you for reading. Please click the "Follow" button to receive more real-time investment alerts from Options Markets. If you found this article interesting (even though it may disagree with your position), please click the "Like" button at the top of the page.
Now, it's time to make your voice heard. Reader interaction is the most important part of the investment learning process! Comments are highly encouraged. We look forward to reading your viewpoints on XBI.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.