Ishares Nasdaq Biotechnology (IBB)

(A Top Pick April 21/15. Down 23.24%.) For 3 years, biotech lead the market. In October last year, virtually the day that Hillary Clinton made comments on drug pricing, it was over. He was stopped out and now has a zero weight in biotechs.

Biotech companies in the US. He likes the space. He owns two biotech names individually. He thinks the space is being misunderstood. He thinks there is opportunity here. He likes the look of the chart.

Feels Biotech would be better than Pharma, as it wouldn’t be a target of the Clinton administration. Thinks big Pharma companies will be closing down their research, and basically outsourcing it to biotech companies. This would be taking a lot of risk, but if you can stomach the volatility it will probably work, and you might get the currency working for you too.

The biotech space continues to be impressive, when you look at the aging demographics globally and what is happening with the growth in the pipelines in some of these companies. He prefers picking individual names that are growing 20%-25%-30% EPS growth rates. However, this is a great way to own an ETF that will give you the entire sector.

This has a huge portfolio of lesser-known biotech and pharmaceutical stocks. A little more volatile. Thinks the sector is going to grow quite well. Has been expensive at times, but has sold off recently. A good area if you want to get into the biotechs. With aging population and more money into the healthcare, these guys are going to do very well.

Momentum plays. The volatility is three times that of a company like IBM. They need to consolidate. Look to the lows recently for where support might be. The trend of falling highs is the resistance.

Everybody should have some biotech in their portfolio. These are companies that develop drugs that help our friends and relatives, and are a very important part of the economy. Extremely volatile. There is probably no other sector out there that will give you such huge potential over such a short period of time. Of the companies with over $500 million market cap, 81% of them are 10% below their 52 week high, and this is a great time to buy it.

Biotech ETF? His pick would be this one. This is a little bit on the high-end, but not unreasonable.

Within the healthcare space, biotech is one of the better valued areas. When you look at some of the names, they offer very good value as well as very good growth. This one has done well, so layer into it at this time.

The only knock that anybody can have about this is that it keeps going higher. The names it holds has to keep going through new highs. If you have owned this for a long time, the selling strategy is to bring it back if it has become too large a portion of your portfolio. Also, you have probably made a lot of money on the currency if you have owned it for a long time. He likes the diversity.

Biotechs mostly don’t pay dividends. When you get into a growth and momentum trade and the stock has doubled in a year or two, then it is not sustainable. He feels there is no value here. Look to take money off the table at some point, not put money in.

This is a biotech ETF, and would be the main one he would look at for this sector.

The month of May is probably one of the strongest months of the year for biotechs. The industry gains about 70% of the time for the month of May. Everything NASDAQ related tends to do well from about mid April all the way through to about mid July. The more predominant period of seasonal strength, which he tends to play, is from about mid June all the way through to September.

One of his core themes for the last couple of years has been biotech. There are all kinds of new products coming down the pipe, with companies that are not terribly expensive. This is a way to get broad exposure to the sector without taking the binary risk that comes in some of the earlier stage companies.

When you look at the largest companies in this, it is Amgen, Gilead Sciences, etc. He recently shorted this in his hedge fund as he thought it was a little stretched on valuations. If you want to play big biotech and growth biotech this is a good one.