The once high-flying healthcare sector has been a dud this year and biotechnology stocks are a big reason why. The iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB), the largest biotech exchange traded fund by assets, has dropped almost 25% just this year, more than enough to put it into bear market territory.
But 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.
Additionally, the actuaries calculated that around 8.4 million Americans became insured in 2014 and noted their increased use of medical services. The number of people on Medicaid is projected to increase to 78.1 million by 2024, outstripping Medicare, which is expected to have 70.3 million enrolled.
However, election year posturing over drug prices represents a significant headwind for the healthcare sector and that is something biotech ETFs like IBB have already proven vulnerable to. Just go back to September 2015 and refer to Hilary Clinton’s Twitter feed.
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