Over the past week there are been an energetic sprint towards the biotech sector. It has been maligned by 27% to close out the quarter and then everyone came in and gobbled it whole.
The rally has been widespread and fierce, sending dozens of stocks up double digits. Encompassing more than a hundred stocks, the median return was greater than 7% for the past week. But individual names like ANAC, EDIT, JAZZ and ICPT have done much better than that.
The market is seemingly at a point when earnings begin to count again. All of the oils and perhaps the retail sectors, both of which have done splendidly in 2016, aren’t expected to impress investors to any large degree. There is a level of non-systematic fear out there, with spirit and vigor leaving the early winners in search for new ones.
If your desire is to live in Fantasy Land, what better place to be other than the biotech sector, an industry without fundamentals and the albatross of having to meet earnings expectations. Of course, if these companies fail to meet their clinical trial goals or become the target of political scrutiny, they will indeed cone under pressure again. But, for the most part, this is the only sector that offers high returns, based on a drug dream similar to playing the lottery, that goes unrivaled in the market place. Because of this, the biotech sector has been the darling of the market, when it was going up, for the better part of the last 5 years.
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