The Nasdaq Biotech Index has gotten out of the gate fast for the second year in a row. As 2015 enters the first turn, though, investors are increasingly concerned that biotech will suffer a similar fate to what it saw last year around this time. The chart below compares the YTD returns of the Nasdaq Biotech Index throughout 2014 to its returns so far in 2015. Just like last year, biotech stocks have been hot to start the year, gaining more than 20% as of last week. The concern for investors now is that the sector has gotten ahead of itself and is due for a fall. That has shown up in biotech stocks over the last few trading days as the index has pulled back more than 7% from its early Friday morning highs to today’s level.
You’ll see in the chart below that the index’s pullback last year was a lot worse than 7%. In fact, from late February through mid April of ‘14, the Nasdaq Biotech Index gave up all of its gains from the first two months and was even down on the year for a brief period, falling a total of 21%. Although the index quickly recovered and finished the year well above its early year highs, investors in the sector certainly don’t want to see a repeat of last spring.
So, what now for biotech? In a report sent out to clients yesterday, we looked at the current valuations, technicals, and performance of the biotech sector through a historical perspective to see if any trends we are seeing now stick out especially. Clients that wish to view the report can click on the link below. If you are not yet a Premium member and wish to subscribe, sign up today for a free 5-day trial.