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Here's an interesting article from Investor's Business Daily arguing that biotech stocks are beginning to recover from their recent declines, notwithstanding current weakness.
This Is Why Biotech Stocks May Explode Again
By Amy Reeves
Excerpt:
After a three-year bull run that more than quadrupled its value by its peak last July, IBD’s Medical-Biomed/Biotech Industry Group plunged 50% by early February, hurt by backlashes against high drug prices and mergers that seek to lower corporate taxes.
[…]
The group was up by even more before taking some hits over the past two weeks on negative earnings news from several industry players. But fund managers tell IBD the rebound is here.
Why? For one, they say, the spate of bad news has already been factored into stock prices. But more than that, they see a climate favoring rejuvenated M&A, hot drugs in the new-product pipeline and pricing power for innovate products.
Bottom line: The positive factors that drove the runup never went away, they say. They just got drowned out by the noise.
“A very key point is that this group is a very high-beta group — particularly the small- to midcap stocks. Since they don’t have sales, they don’t have earnings,” said Tom Vandeventer, portfolio manager at Tocqueville Asset Management.
“The history of this group is that elevated macro uncertainty definitely hits (it),” Vandeventer said. “My own opinion is this group trades more on sentiment than on fundamentals during those time periods.”
