Summer Sets Up Second Shot at Biotech Stocks

Last year, Gilead Sciences(GILD) traded down into the mid-$50s in late June. If an investor bought the stock then and held it through today, he'd be up about 45%.

During the summer of 2006, Acorda Therapeutics(ACOR) shares sank through $3 and bottomed out at $2.22 on Sept. 22. The next trading day, Sept. 25, the company announced positive phase III trial results and the stock soared to more than $8.

I've written positively about Exelixis(EXEL) in the past because of its deep pipeline of targeted cancer drugs scattered through early and mid-stage development. Yet the company's relatively high valuation has always been a sticking point.

But last August, Exelixis shares slumped into the $7.50 range, making it an excellent entry point into the stock, which now trades just under $11.

The point here isn't to look back at some charts and claim brilliance with some well-timed stock picks. It was an arbitrary choice of time frame, and a six-year period isn't that long. What's more, the summer months aren't exclusively when biotech stocks fall, and in two of the six years I looked at, stocks went up during the summer.

But my analysis does suggest that biotech stocks do slump in the summer, often to year lows. If you feel like you've missed out on a biotech stock's run-up earlier this year, the June-September time period can -- and often does -- offer a second chance.

>To order reprints of this article, click here: Reprints