Thursday, July 10, 2008

Biotech ETF's outpeforming during market correction
Biotech stocks are currently bucking the downtrend of the general market. One fund in particular, the Biotech HOLDR's has broken above its 50 and 200 day moving average. As those of you know, the S&P, Dow, and the Nasdaq are all trading below those moving average lines.

The HOLDR's is a basket of stocks, with 14 primarily large-cap stocks. The symbol is BBH and it has outperformed all other biotech and health care ETF's this year. So far this year, the return has been 10 YTD, while the S&P has been in negative double digit territory for the past few weeks.

This could be a sign of sector rotation, meaning that Oils/Fertilizers and Agriculture are being sold while other beaten down sectors start to move up.

The 3 largest holdings in BBH are Genentech, Gilead Sciences, and Amgen. Genentech has recovered from a 2.6% loss Monday following concerns about a brain disease in patients that also take Rituxin. Earnings growth varied from 13% to 61% in the past 5 quarters. Sales growth has slowed from 43% growth to 8%.

Gilead is a maker of HIV drugs and Tamiflu. It has beat earnings estimates in the past 10 quarters and has experienced from 7-48% earnings growth over the past 4 quarters. The HIV business accounts for about 2/3rds of 2007 sales.

Amgen has an experiemental cancer drug called motesanib which has shown that it can stop the growth of thryroid tumors in patients in the most serious stage of the disease according to a recent study.

So the BBH could be a potential investment opportunity as it is also showing a product technical analysis pattern.

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