Biotech Stocks: This Industry Could Deliver 172%+ Gains in 2016

biotech stocksThis Could Send Biotech Stocks Soaring

Over the past few years, the biotechnology sector has been one of the top performers, but market sentiment has changed as biotech stocks sink into the abyss. The hurt on this segment is partly justified, but there are potential opportunities for aggressive capital, especially with some of the leading blue-chip pharmaceutical stocks on the Dow Jones Industrial Average, such as Merck & Co., Inc. (NYSE:MRK) and Pfizer Inc. (NYSE:PFE).

While the biotechnology sector has been ravaged by the selling capitulation, my sense is it has been overdone, with potential opportunities to pick up some world-class companies on weakness.

The attacks on the drug industry by both Democratic presidential hopefuls Hillary Clinton and Bernie Sanders have not helped the biotechnology sector. Secretary Clinton has promised to revamp the drug sector as far as the pricing of drugs, which could result in lower drug prices and operating margins.

This risk of the unknown is clearly pressuring the biotech sector and biotech stocks.

And of course we have the market mistrust given the fiasco at Valeant Pharmaceuticals Intl Inc (NYSE:VRX), which was found to be undertaking some potentially unethical business practices with the way it distributed and sold its drugs via the use of specialty pharmacies.

Then we had the recent decision by Pfizer to drop its proposed $160-billion purchase of Ireland-based Allergan plc (NYSE:AGN) in an inversion deal. The deal would have allowed Pfizer to move its headquarters to Ireland to take advantage of lower taxes.

Healthcare Will Continue to Be a Top Growth Area

So while there are many uncertainties in the biotech sector, I’m long-term positive, as the uncertainties will eventually be cleared and biotech stocks will again move higher.

The healthcare sector remains an intriguing area to invest in due to the aging global population and the continued demand for drugs and medical devices.

The iShares NASDAQ Biotechnology Index (ETF) (NASDAQ:IBB), a good barometer on the biotech sector, appears to have found chart support and could soon be launching a technical breakout around $270.00 as shown on the chart below. The exchange-traded fund (ETF) is down 23% year-to-date and has been one of the worst performers in the stock market, but things can reverse.

IBB Biotech iShares Chart 1

Chart courtesy of

The IBB ETF’s top five holdings include Amgen, Inc. (NASDAQ:AMGN), Gilead Sciences, Inc. (NASDAQ:GILD), Biogen Inc (NASDAQ:BIIB), Celgene Corporation (NASDAQ:CELG), and Regeneron Pharmaceuticals Inc (NASDAQ:REGN). (Source: “IBB Holdings,” Yahoo! Finance, last accessed April 15, 2016.)

A slightly more aggressive mid-cap biotech ETF is the SPDR S&P Biotech (ETF) (NYSEArca:XBI), which is managed by SPDR State Street Global Advisors and tracks the S&P Biotechnology Select Industry Index. The ETF has $1.9 billion invested in predominantly mid-cap biotechnology stocks.

The XBI ETF, while down 26.32% year-to-date, has managed to return an average of 16.56% over the past three years and 18.89% over the past five years as of March 30.

XBI SPDR S&P Biotech Index ETF Chart

Chart courtesy of

The XBI ETF’s top five holdings include ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD), Medivation Inc (NASDAQ:MDVN), Neurocrine Biosciences, Inc. (NASDAQ:NBIX), Intercept Pharmaceuticals Inc (NASDAQ:ICPT), and Novavax, Inc. (NASDAQ:NVAX). (Source: “XBI Holdings,” Yahoo! Finance, last accessed April 15, 2016.)