This commentary previously appeared on Real Money Pro on Oct. 22, 2015, at 10 a.m. ET. Click here to learn about this dynamic market information service for active traders.
It was already tough sledding for biotech and pharma investors before the mainly election-driven rhetoric about drug price gouging hit the sector in October. Hedge-fund hotel Valeant Pharmaceuticals (VRX) has become the poster child for the bad actors in the space. It is now a battleground stock. On one side are noted short sellers like Citron Research and media outlets like the New York Times trying to take down the company's business model; on the other side are famed fund managers like Bill Ackman, who reportedly upped his stake by a reported $200 million as the stock continued to plummet.
I have no opinion on Valeant and I do not hold it. But if I were going to take a shot at a quick profit, I might do some out-the-money bull-call option spreads with the hope of a quick rebound and gain.
Other than that, I am not touching this leper. I am allocating additional funds to long-term, large-cap growth stocks that have been caught up in the recent aversion to biotech and biotech stocks. The largest biotech ETF, the iShares Nasdaq Biotechnology ETF (IBB) , is in official bear territory, but seems to be holding around the $300 level.
I bought a few more shares of Biogen (BIIB) Wednesday. The company reported better-than-expected earnings and raised guidance Thursday. Usually those results would have the stock up 7% to 10%, but the shares only gained 4% and at one point during the day were barely above their opening price after these results.