Hedging Biotech Risk (1/16)

Over the past five years, the biotech ETF (IBB) delivered a total return of roughly 200%, three times the S&P 500’s total return of 60%. However, over the past six months, these indexes suffered reversals of 30% and 15%, respectively.

A few months ago, the article below noted the trend change in biotech. ETF PM currently has short-term trading positions in the UltraShort Biotech ETF (BIS).

Yes, the Biotech Crash Could Actually Get Worse

The S&P 500’s biotech ETF has lost a third of its value in just 10 weeks — and this could be just the beginning.

Sean Williams, 10/4/15

Since the stock market hit its trough in March 2009, few industries have performed as well as biotech. Over just the trailing five years the broad-based S&P 500, arguably the most all-encompassing indicator of market health, is up 62% through Sept. 29, 2015 — compared to the near-tripling in the SPDR S&P Biotech ETF.

Why have biotech stocks been such outperformers? It’s not uncommon for investors to flock to industries with higher growth potential and more risk when a bull market is romping higher. With the bull market about six years old now, investors’ appetite for biotech has been mostly insatiable… until recently.

Click here for the full article.


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