The political lines have been drawn, it’s Clinton verses Trump. I written several pieces evaluating the massive sell-offs in the biotech sector. Utilizing the iShares Nasdaq Biotechnology ETF (NASDAQ:IBB) as a proxy, I proposed a loose correlation between opportunistic political posturing by political front-runners and the chronic price suppression of IBB. I content that political posturing played a significant role in the sell-off of the healthcare cohort and more specifically biotech stocks. Drug pricing was used as a centerpiece as the scapegoat for political gains. Throughout this political process, this rhetoric has negatively impacted the sector. IBB fell from $401 in July of 2015 to $240 in February of 2016 or alternatively a 40% hit. This sell-off coincided with political rhetoric aimed at the collective cohort of healthcare and biotech companies. I strongly felt that these events were seasonal and would eventually subside without any significant impact to the underlying stocks within IBB. I felt this political induced sell-off presented a great buying opportunity after the 40% decline. I put my money where my mouth was by purchasing two tranches of IBB at a strike price of $250 in February and June during the market-wide sell-off and the Brexit, respectively. I feel that this is great entry point for any long-term investor that desires exposure to the biotechnology sector.
Are Drug Prices Really The Culprit?
In terms of the overall cost to the healthcare system, drugs comprise less than 10% of the pie. Allergan CEO Brent Saunders stated in an interview with Jim Cramer on Mad Money (Figure 1): Continue reading "The Presidential Nominees Are Set"