After disappointing investors last year, the iShares Nasdaq Biotechnology ETF (NasdaqGM: IBB), the largest biotechnology exchange traded fund by assets, and rival biotechnology ETFs are rebounding and plenty of market participants are taking notice.
Up about 12.6% year-to-date, IBB continues trading the technically important $300 area. The ETF resides almost 7% above its 200-day moving average.
“This great start to 2017 follows a wretched 2016, in which the ETF fell more than 21 percent due in part to highly publicized concerns over drug pricing. Looking forward, Oppenheimer technical analyst Ari Wald advises that investors “buy biotech,” calling the IBB one of his favorite trade ideas,” reports CNBC.
Biotechnology historically trades at multiples that are elevated relative to broader benchmarks, but after last year’s of struggles for biotechnology names, some analysts see value with some big-name biotech stocks.
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.
“Taking the other side of the trade, Max Wolff of 55 Capital doesn’t see a lot of upside in the near-term, due to the magnitude of its recent run, as well as building uncertainty about health-care policy,” reports CNBC.
IBB lost $192.2 million in assets for the week ended March 9th, bringing its year-to-date outflows total to just over $253 million.
ETF traders who are betting big on the biotechnology sector rebound have also utilized leveraged long options including the Direxion Daily S&P Biotech Bull Shares (NYSEArca: LABU), which takes the 3x or 300% daily performance of the S&P Biotechnology Select Industry Index.
Other options include the ProShares UltraPro Nasdaq Biotechnology (NasdaqGM: UBIO), which takes the 3x daily performance of the Nasdaq Biotechnology Index, and the ProShares Ultra Nasdaq Biotechnology (NasdaqGM: BIB), which takes the 2x performance of the same benchmark.
For more information on the biotech sector, visit our biotechnology category.