After the positive CPI data in the United States overnight, traders chose to withdraw from the recent strong-performing technology giants.
According to data, the seven giants have evaporated a total market cap of nearly $600 billion, marking the largest single-day drop since February 2022.
At the same time, a lot of funds have poured into the sectors that were sold off earlier, including biotechnology stocks. Overnight, they rose another 2.6%, achieving their fifth consecutive increase with a cumulative increase of nearly 8% over the past 5 days.$SPDR S&P Biotech ETF (XBI.US)$Which biotech stocks are quietly rising? From Futubull, screening for stocks in the sector with a market cap greater than $5 billion shows that many companies have quietly risen so far this year. Of course, in addition to the stimulation of interest rate cuts, these companies have also been boosted by their own bullish news.
Which biotech stocks are quietly rising?
From Futubull$Biotechnology (BK2069.US)$Screening for individual stocks in the sector with a market cap greater than $5 billion shows that many companies have quietly risen so far this year. Of course, in addition to the stimulation of interest rate cuts, these companies have also been boosted by their own bullish news.
Among them, Akeso's partner$Summit Therapeutics (SMMT.US)$, weight-loss drug "Star"$Viking Therapeutics (VKTX.US)$ have all risen by more than 2 times this year; global biopharmaceutical company$Insmed (INSM.US)$$Krystal Biotech (KRYS.US)$$Krystal Biotech (KRYS.US)$have all risen by more than 50%; companies specializing in the development of drugs for pulmonary arterial hypertension$Sarepta Therapeutics (SRPT.US)$ have all risen by more than 35%.$United Therapeutics (UTHR.US)$RNAi leading company.$Alnylam Pharmaceuticals (ALNY.US)$In addition, weight-loss drug giant
In addition, weight loss drug giant.$Novo-Nordisk A/S (NVO.US)$,$Eli Lilly and Co (LLY.US)$This year, it has repeatedly hit record highs.
On the news front, the global GLP-1 drug market continues to expand. With long-acting GLP-1 drugs as the core driving force, it is expected that the global market size will reach US$40.7 billion by 2030. Dasiglucagon, a large single product, has shown clinical superiority in lowering blood sugar. Potential indications such as cardiovascular disease, AD, NASH are steadily progressing.
In 2023, the single-target drug dasiglucagon achieved global sales of US$21.158 billion, becoming the first GLP-1 innovative drug with annual sales exceeding 20 billion. The dual-target drug tirzepatide achieved US$5.163 billion, and achieved rapid growth in the second year after listing. Novo Nordisk and Eli Lilly's market value hit a new high in 2024 with these two drugs.
What do institutions think?
In fact, from the perspective of the biotechnology industry stock price trend, it started a wave of rising in the first half of the year due to the continuous release of interest rate cuts by the Federal Reserve. However, with the repeated fluctuations in the expectations of the Federal Reserve's interest rate cuts, the sector gradually fell back after hitting a new high for the year in early March. From the overall trend in the first half of the year, it only recorded an increase of about 4%, far behind the large-cap market.$SPDR S&P Biotech ETF (XBI.US)$Looking ahead to the second half of the year, with the gradual clarity of the Federal Reserve's interest rate path, many institutions believe that biotechnology companies are expected to usher in a strong trend. Morgan Stanley believes that the Federal Reserve is expected to cut interest rates and increase mergers and acquisitions, which will push biotech stocks to perform better than the market. Historical data shows that the biotechnology sector usually performs better than the market in the months before the first rate cut. Large pharmaceutical companies have begun to supplement their product portfolios, and major mergers and acquisitions have gradually emerged. In addition to the prospect of interest rates, there is still fundamental demand for mergers and acquisitions of small and medium-sized biotechnology market capitalization. Large biopharmaceutical companies are expected to face patent expiration at the end of this decade, while also having a high level of cash generation.
In addition, there is a market view that the funds that previously hid in technology stocks were actually safe-haven funds. The most popular strategy for US stocks in the first half of this year was to "hide" market funds in large technology companies like Nvidia every time inflation exceeded expectations, while reducing holding small-cap stocks. Because the fundamentals of large technology companies are driven by AI, and their correlation with inflation and the economy is low, and they have sufficient cash flow. However, once inflation slows down, market funds begin to shift to interest rate trades, selling technology stocks and buying small-cap stocks. Market insiders further analyzed that the Nasdaq index is likely to lag behind small-cap stocks and interest rate-sensitive sectors such as biotechnology for a period of time.
In addition, investors can closely monitor this indicator. From historical data, biotechnology stocks maintain a high degree of correlation with the 10-year US Treasury yield.
As the discount rate of these high-risk growth companies, the trend of the 10-year US Treasury yield is crucial to the valuation of biotechnology companies. As shown in the figure below, there is a close negative correlation between the yield curve trajectory and the performance of biotech companies.
Market views believe that with the increase in expectations of the Federal Reserve's interest rate cut, the 10-year government bond yield is expected to fall to 4% or lower. The performance of the biotechnology industry in the second half of the year is expected to be good and may even exceed the performance of more broad market indices. Analysts predict that the rise of the biotechnology industry will continue until October, when the uncertainty of the election will create a typical safe-haven environment until the end of the election.
How should investors choose?
The result depends on how you choose the strategy. $U.S. 10-Year Treasury Notes Yield (US10Y.BD)$From historical data, biotech stocks maintain a high degree of correlation with the 10-year US Treasury yield.
As the discount rate for these high-risk growth companies, the trend of the 10-year US Treasury yield is crucial to the valuation of biotechnology companies. As shown in the following figure, there is a close negative correlation between the yield curve trajectory and the trend of biotechnology companies.
Market views believe that with the increase in expectations of the Federal Reserve's interest rate cut, the 10-year government bond yield is expected to fall to 4% or lower. The performance of the biotechnology industry in the second half of the year is expected to be good and may even exceed the performance of more broad market indices. Analysts predict that the rise of the biotechnology industry will continue until October, when the uncertainty of the election will create a typical safe-haven environment until the end of the election.
Investors should choose according to their own risks and preferences.
Although considering biotechnology as one of the diversified choices of the investment portfolio is undoubtedly wise, for non-professional investors, accurately selecting biotech stocks with potential in the complex market is undoubtedly a challenging task.
Therefore, biotechnology ETF may be an investment direction worth considering for investors. FUTU News has compiled several biotech ETFs for MOORers' reference:
1) SPDR S&P Biotech ETF (XBI)
$SPDR S&P Biotech ETF (XBI.US)$The top three components are small nucleic acid drug leader,
the company specializing in the development of drugs for pulmonary arterial hypertension,$Sarepta Therapeutics (SRPT.US)$$United Therapeutics(UTHR.US)$$United Therapeutics (UTHR.US)$RNAi leading company.$Alnylam Pharmaceuticals (ALNY.US)$All three stocks have recently hit new highs this year.
2) iShares Biotechnology ETF (IBB)
$iShares Biotechnology ETF (IBB.US)$It is a leading ETF that tracks a weighted index of biotechnology industry stocks, with assets under management exceeding $7.2 billion. The ETF balances the stability of large-cap stocks with the high returns of small-cap stocks. Its current main investment targets include$Vertex Pharmaceuticals (VRTX.US)$,$Amgen (AMGN.US)$,$Regeneron Pharmaceuticals (REGN.US)$,$Gilead Sciences (GILD.US)$and other companies.
3) ARK Genomic Revolution ETF (ARKG)
$ARK Genomic Revolution ETF (ARKG.US)$It is an actively managed ETF under the ARK Invest umbrella, which invests (at least 80% of its assets) in multiple companies seeking long-term capital appreciation, including medical, information technology, materials, and companies focused on targeted therapies, stem cell research, and agricultural biology.
4) 3x Long Biotech ETF (LABU)
$Direxion Daily S&P Biotech Bull 3x Shares ETF (LABU.US)$It is a leveraged ETF issued by Direxion on May 28, 2015. In short, it also tracks the S&P Biotechnology Select Industry Index, but provides three times the daily performance of the index through derivatives and common stocks held. It is suitable for investors who want to hold a certain leverage and have higher risk tolerance.
In fact, in addition to the above four ETFs, there are also many biotech ETFs in the US stock market, including$First Trust Exchange Traded Fund Nyse Arca Biotechnology Index Fund (FBT.US)$,$VanEck Biotech ETF (BBH.US)$,$Invesco Biotechnology & Geno Funds (PBE.US)$,$Ishares Gold Trust Genomics Immunology And Healthcare Etf (IDNA.US)$and many more.
Mooers can find their favorite ETFs through Futubull APP> Market> ETF> Biotechnology ETF!Market>ETF>Theme ETF>Semiconductor ETFBiotechnology ETF, find your favorite ETF!
Editor/Somer