Don't Hate Josh Brown For Calling Biotech a Bubble. Learn From Him.
The best commentary on the biotech meltdown today came from an outsider. Josh Brown, professional wealth manager, author and all-star blogger, says biotech is a bubble.
If you want to understand why your beloved biotech stocks are tanking, you must read Brown's blog post right now. Hell, if you already read Brown's post earlier today, read it again.
You've heard a lot of talk about the "generalist investor" and their collective impact on biotech stocks. They bought up sector to incredible heights, but now it looks like the generalists are selling it down -- at least a little bit.
Brown is NOT a biotech expert. He isn't going to analyze clinical data or explain why immuno-oncology is the new treatment paradigm in oncology. Brown IS an astute market observer from outside the biotech clubhouse. He provides a fantastic perspective for those of us who wake up thinking about biotech stocks and don't stop until our head hits the pillow. In other words, we're too geeked out about all this stuff to understand how 99% of investors think. [Hint: Generalist investors don't think like us, but since they control most of the investment capital and decide the direction of the markets, it's probably a smart idea to know what they're doing.]
You may not agree with Brown's analysis. You may get offended. That's fine. But guaranteed, you'll learn something, regardless. Read it.
More selling today. The Nasdaq Biotechnology Index (NBI) lost another 3%, adding to March losses. Here's the updated chart:
IBB data by YCharts
Gilead Sciences GILD managed to close up 6 cents to $72.13 so maybe a signal there that investors will start to differentiate the strong performers from the over-valued, bubbly junk.
Here's a chart of big-cap biotech performance YTD:
CELG data by YCharts
Here's some intra-day biotech commentary from the market strategists at ISI Group:
Biotech, spec pharma and beta continues to be sold today and have seen consistent theme with flows-generalist/long only selling in Biotech without a real incremental bid yet (buyer's strike continues), more dedicated hedge fund long selling in Spec Pharma and IBB volume continues to be very high (Friday was biggest volume day since '05 and looks like will easily surpass that today) as hedge funds continue to hedge out Biotech longs w/ IBB and massive HC inflows into ETFs YTD is unwound.
ISI's Mark Schoenebaum sent out another buy-side sentiment survey today, with 59% of respondents predicting biotech will outperform in 2014. Twenty-seven percent said the sector will be in-line, with 14% forecasting underperformance. On an absolute basis, most respondents picked the major biotech indexes to be up 10-15% this year, Schoenebaum said.