The iShares Nasdaq Biotechnology ETF (NASDAQGM: IBB), the largest biotechnology exchange traded fund by assets, is up nearly 18% and the behemoth biotech fund could add to those gains in September. The ninth month of the year sets up favorably for some of IBB’s marquee holdings.
Biotech ETFs soared even after it became apparent Senate Republicans’ efforts to replace the Affordable Care Act, also known as Obamacare, are stalling. Healthcare stocks are also showing attractive valuations relative to other defensive sectors, which are richly valued.
Alexion (NASDAQ: ALXN) “has now added more than 44% since hitting a nearly three-year low of $96.18 in late May, but is running into familiar resistance in the $140-$145 region — a neighborhood that’s contained ALXN shares for the past 14 months. If history is any guide, the stock could overtake this area over the next several weeks,” according to Schaeffer’s Investment Research.
Alexion, IBB’s sixth-largest holding at a weight of almost 5%, was positive in 57% of the past 21 Septembers, averaging a return of 5.7%, according to Schaeffers. Celegene (NASDAQ:CELG), IBB’s third-largest holding at a weight of 8.3%, is another solid September performer.
“More gains could be on the horizon, if history is any guide. Over the past 30 years, Celgene stock has averaged a 5.3% gain in September, and has been positive more than half the time,” according to Schaeffer’s.
Gilead Sciences (NASDAQ: GILD) and Regeneron (NASDAQ: REGN), a combined 15.6% of IBB’s weight, are also, historically, impressive September performers.
Related: Biotech ETFs Prescribe Investing Momentum
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 biotech category.