Few corners of the market have been endured presidential election year volatility on par with biotechnology stocks and exchange traded funds such as the iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB).
Actually, political headwinds faced by IBB and rival biotechnology ETFs dates back to last year. According to the NASDAQ, on the settlement of September 30, 2015, IBB short interest surged 23.82% to 11.54 million shares, since Hillary Clinton sent out a tweet on September 21, 2015 saying, “Price gouging like this in the specialty drug market is outrageous. Tomorrow I’ll lay out a plan to take it on. -H.”
The tweet was in response to then CEO of Turing Pharmaceuticals Martin Shkreli, after Turing raised the cost of an older antibiotic drug, Daraprim, by more than 50-fold and said the drug was still a bargain at $750. Since then, IBB’s short interest has dropped to 5.7 million shares, as of settlement on June 15, 2016, or about 22.89% of shares outstanding,” according to a Seeking Alpha analysis of biotech short interest.
Investors who are closely watching the presidential race will want to keep an eye on Clinton in the coming months. If Clinton makes her way to the Oval Office and implements more regulation on pharmaceutical drug pricing, biotech companies may underperform the broader market.
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However, in the essence of political fairness, Republican nominee Donald Trump has had his own harsh words on high drug prices. Still, some market observers see a Trump victory, if that happens, as a potential catalyst for biotech stocks.
“Since Democratic candidate Hillary Clinton vowed to control the rise of drug prices in the pharmaceutical space, investors have been expecting the sector to be impacted by the presidential election in November. Trump has also voiced concerns about drug prices. However, Larry McDonald, managing director at ACG Analytics, said Trump could help this group of stocks,” reports CNBC.
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IBB, which holds nearly 190 stocks and is a cap-weighted ETF, has a price-to-earnings ratio of just over 21 and a price-to-book ratio of 4.92. The ETF’s three-year standard deviation is just over 25 percent.
“Biotechs have been hammered over the last year or so, because of some of Hillary Clinton’s comments, so a Trump presidency is bullish for the biotechs,” said McDonald in a CNBC interview.
iShares Nasdaq Biotechnology ETF
