On Aug. 9, the Amex Biotechnology Index (BTK) hit what is likely to be a bottom for the season at 448. If this year is like most years past, investors can expect the sector to rally through September, pause, then rally again from December through February.
Obviously, the rally isn't guaranteed. One need look no further back than 2001 for an exception to the rule. That year, the sector delivered its customary August rally but petered out prematurely on Aug. 27, beginning a decline that lasted until Sept. 24.
But in most years, biotechs decline in the spring as investors anticipate a summer hiatus in the conferences where new clinical results are announced. They rally in the fall as the conference schedule and the volume of news increases. Investing in biotechs now fulfills one of my basic investing tenets: Buy when the playing field is biased in my favor, and avoid it when it isn't.
Three Reasons Now Is the Time
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