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It’s Been a Tough Month for Healthcare Stocks but Momentum Favors Small Cap Biotechs.

Large cap Biopharmaceutical stocks sold off because of competition and lower revenue growth.

MedTech sector show less volatility and more growth potential for 2025.

SMID caps show good trading prospects because of new products, pipeline and M&A.

It’s been a very difficult month for the healthcare sector not only because of disappointing Company news but also disruption caused by the election and future policy issues with an incoming TRUMP administration. We covered some these issues on previous posts but we can say in general that I cant remember a period where so many issues have arisen with specific large cap companies. We wrote about some of the fallout on November 3 and recommended a tighter portfolio review with some rebalancing.In the meantime the overall market performance has been broadening out with general indices like the S&P 500 or even the DOW industrial and cyclical stocks. All major indices have hit new highs last week up about 25% YTD, almost twice as good as typical diversified heathcare portfolio for an active fund for example the PRHSX up 10% YTD.  Investors have moved away from MAG 7 up 5.87% MTD and technology stocks as well: XLK up 25% YTD . So given all the usual changes we expect as the 2024 Calendar turns we have a NEW ADMINISTRATION with potential for unprecedented news and potential for greater volatility.Momentum in the market is expected to continue through year-end.  However the sectors with the strongest momentum are in order: technology, financials and consumer defensive and industrial all stronger than healthcare. Looking at actual sector performance through  the  SPDR ETFs  it looks something like this: Communication services up 27.78%, Financials up 25.8%, Industrials up 18.61%, Technology up 16.1% and Healthcare 8.98%.We provided an update of our SMID cap trading portfolio recently and here are some notable winners: ADPT, BBIO, CPRX, CRMD, EXEL, NTRA, SUPN, TEM, TWST, VCEL.VCYT.AS of the 12/2 opening at 10am EST biotech stocks are mixed to down with the XBI at the $98 level a stalled rally. MAG 7  stocks are up: AAPL, META, NVDA, TSLA etc.
Here are some takeaways from November 2024 stock performance after Q3 earnings;

Only three of our large cap biopharma picks “avoided” the recent correction: ABBV up 18% YTD, LLY up 36% YTD, VRTX up 15% YTD. But all stiil took a hit.

Two lagging large caps showed gains for the month: BMY up 12.5% and GILD up 4.3%.

Two big large cap losers for the month: LLY and REGN had competitive and revenue issues  See November  reports

Big gainers for the month in healthcare: UNH up 7.95% and XBI up 11.57%.

We favor SMID biotechs because of M&A and general trends in the market favoring small cap growth (IWM, IGR).

MedTech and devices show strength after Q3 earnings: FSMEX up 4.5% for November and 15.9% YTD; the IHI is up 3.77% for November and 13.23% YTD.

Top ETFs trending up are the IHI and the XBI, although technically IBB is also in an uptrend.

Model                           PORTFOLIO           *                   2020   2020 2020 2021 2022 2023 2024   5 yr %     Stock/fETF Ticker Price Wgt Price   Price Price Price P             10/25 % 12/31 % Perf 12/31/21 12/31/22 11/11 11/30 %Perf % % H                 P   YTD   MTD 2024 iShares NAZ Bio IBB 136 10 151.5 25.7 152.62 130.55 115.53 141.55 4.2 18.56 0.83 148.85                             iShares Russell 2k IWM 163 10 196.4 18.3 222.45 174.36 175 241.87 20.51 48.54 8.73 241.87 Merck* MRK 80 10 81.77 -10 76.64 115 101.39 101.64 -6.77 31.58 -2.48 -132.96 United Health UNH 330 15 350.7 27.19 502 530.27 541.21 610.2 15.9 132.17 7.95 625.25 SPDR S&P Bio XBI 117 10 140.8 48 111.96 83 66.95 99.62 11.8 6.64 11.57 104.19 Healthcare SPDR XLV 108 25 113.4 14.71 140.89 135.88 126.27 147.41 8.09 47.65 -0.94 157.24 T.Rowe Hlth Sci PRHSX n/a 5 99.65 n/a 104 89 83.41 96.88 10.22 15.18 -0.61 101.48 iShares U.S MedT IHI 50 10 54.83   65.85 52.57 45.75 61.11 13.23 40.53 3.77 61.11 MedTech* ABT   5 123.5   127.46 109.83 94 118.77 7.9 39.04 4.12 120.92 Diversfied MED JNJ new             155 -1.1 12.53 -4.08 167.16                             Tracking Comp                                                       ARK Genomic ARKG     93.26   61.24 28.23 24.1 25.98 -20.82 -25.11 7.98 33.16 Direx3X Bull LABU           7.66 2.74 125.53 2.92 -80.41 – 174.12                                                         FIDO Biotech FBIOX **   25.18   19.35 16.04 14.39 20.89 17.16 -7.03 -2.66 22.47 FiDO MEDtech FSMEX     76.15   83.18 60.04 51.64 69.18 11.69 15.69 4.52 69.18 JanusHendLifeSc JNGLX               77.42 11.99 23.6 -1.66 82.6                             DOW DIA     310   363.32 331.34 343 450 19.4 59.66 6.14 450 S&P 500 SPY     379   475 382.41 440 602.55 26.77 91 3.74 602 NASDAQ-100 QQQ     315   397.85 266.33 378.39 509.7 24.5 147.4 2.89 514 Technology SPDR XLK     128.93   161.97 124.44 179.52 233.7 21.4 164.34 1.52 238                             Top Biopharmas *           2022 11/23 11/30/24 %YTD 5 yr % total 1 mo. H                             Abbvie ABBV *         161.64 138.59 182.93 18 107 -3.56 203.9 Amgen AMGN               282.87 -1.79 20.6 -10.8 337 Astra Zeneca AZN           68 63.17 67.62 0.4 38.65 -11 87.3 Bristol Myers Sq BMY           71.05 50.61 59.22 15.42 2.81 12.5 59.82 Gilead Sci GILD *         85.39 75.92 92.58 14.28 37.9 4.3 97.9 Eli Lilly LLY *         447.71 597.71 795.5 36.4 627.87 -11.19 950 Merck MRK *         110.95 101.39 101.64 -6.77 21.58 -2.48 132.9 Pfizer PFE *         51.24 29.48 26.21 -8.96 -28.5 -9.18 31.39 Regeneron REGN *         725 798 750.22 -14.58 101.9 -19.2 1200 Vertex VRTX *         288.78 373.65 468 15.05 112.7

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