U.S. stocks appear headed for a fifth consecutive day of gains. While that is good news, the S&P 500’s recent winning streak serves as a reminder regarding why October is, historically, the most volatile month of the year.
Despite that volatility, biotechnology exchange traded funds have been surprisingly firm this month. Surprisingly because biotech ETFs were victims, and catalysts in the eyes of some market participants, of a savage momentum sell-off that started late in the first quarter and lasted into the second quarter. [Biotech ETFs Enter Bear Markets]
Things have been starkly different for biotech ETFs this month. In fact, to this point in Thursday’s session, just five ETFs have touched new all-time highs: The iShares Nasdaq Biotechnology ETF (NasdaqGM: IBB), Market Vectors Biotech ETF (NYSEArca: BBH), First Trust NYSE Arca Biotechnology Index Fund (NYSEArca: FBT), PowerShares Dynamic Biotechnology & Genome Portfolio (NYSEArca: PBE) and the ProShares Ultra Nasdaq Biotechnology (NasdaqGM: BIB). BIB is the double-leveraged equivalent of IBB, the largest biotech ETF.
In a sign of their temerity, BBH, FBT, IBB and the PBE entered Thursday with an average October gain of 2.5%. Some recent strength in small-caps has propel the equal-weight SPDR S&P Biotech ETF (NYSEArca: XBI) to an October gain of 3.5%. All that while the S&P 500 came into Thursday with an October loss of 1%. XBI needs to gain another 4.5% to reach its all-time high. [Biotech ETFs Firm Amid Market Malaise]
Some savvy investors have enjoyed the October biotech bounce. IBB has added $288.4 million in new assets this month while FBT, BBH and XBI have seen combined inflows of over $56 million. That compares to the third quarter when the five major biotech ETFs saw net outflows of about $74 million on a combined basis.
Indeed, the recent market pullback did not leave all biotech stocks unscathed and that goes for some of the sector’s leaders and marquee names. However, some analysts see the pullback in some big-name biotechs as a perfect buying opportunity.
For example, Stifel was out with a note last week, anointing Alexion Pharmaceuticals (NasdaqGS: ALXN) with a $222 price target and Biogen Idec (NasdaqGS: BIIB) with a $376 target. That is 20% above current levels for Alexion and 19% above current levels for Biogen. Those stocks combine for 11.5% of IBB’s weight.
iShares Nasdaq Biotechnology ETF
