Investors in healthcare stocks and exchange traded funds have likely had their fill of hearing about the sector’s first-quarter doldrums, most of which were caused by a continuing biotechnology slump. Those investors should take heart because bullish technical chatter regarding some marquee biotech ETFs has recently been intensifying.
For example, the iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB), the largest biotech exchange traded fund by assets, extended a bear market in the first quarter, but that has only amplified calls for a second-quarter biotech rebound.
The time to buy, regardless of sector, is usually when a particular group falls out of favor, not when it has been bid higher by scores of investors. Some investors view that as the case with the broader healthcare group and biotechnology in particular.
Biotechnology ETFs should also prove immune to hawkish changes in Fed policy. A recent study by Deutsche Bank indicates major biotech indexes have negative correlations to changes in 20-year U.S. government bonds. Looking ahead, in the years through 2024, spending growth is projected to average 5.8% and peak at 6.3% in 2020.