IBB

Adviser Fees on Indexed Assets Can Eat Up Your Nest Egg?

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Indexing sounds like an easy way to track the market’s performance, but if your indexed assets are held in financial advisors’ accounts, it can come with a big cost: significant underperformance. Over 20 years, we estimate in this hypothetical example that the cumulative cost as a result of a 1% annual financial advisor fee on indexed assets can amount to as much as 66% of a saver’s initial investment — just for holding an index fund. Please be careful out there!

Gilead Sciences Finally Takes Out A Promising Biotech

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Image Source: Gilead We were generally pleased to see that Gilead Sciences has decided to put its vast cash hoard to use by acquiring a cutting-edge technology that will further its clinical pipeline. Though it has become fashionable for many in the investment world to engage in M&A speculation as to whom Gilead might finally acquire, our research focus has instead been on the fundamental case, and the inevitable decline in HCV sales seems to have stabilized with the company reporting a beat-and-raise quarter this past July. Based on the improved outlook, the vastly improved technical backdrop, and improved technicals, we added the company to the Best Ideas Newsletter and Dividend Growth Newsletter portfolios. We also think Gilead has largely … Read more

Gilead’s Stock Rockets Higher

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Gilead’s stock is soaring on a technical breakout of the downtrend. Value investors have joined the party, too, as the hepatitis-C powerhouse remains undervalued on our discounted cash-flow process. When value and technical/momentum investors like the same stock, it often surges, and that’s what we’re witnessing. Gilead has become a Valuentum stock. By Brian Nelson, CFA It’s good to see the Valuentum stock-selection methodology working well. The latest example is Gilead (GILD). For a long time, we thought shares of the hepatitis-C powerhouse were undervalued on our discounted cash-flow process, but we didn’t add it to the newsletter portfolios until shares broke through their defined downtrend more recently. Since the time we added shares to the newsletter portfolios (July 31), … Read more

Generic Drug Price Deflation Continues to Weigh on Shares of Teva

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Shares of former Best Ideas Newsletter portfolio idea Teva Pharmaceuticals have come under renewed selling pressure after reporting weak quarterly results due largely to deflationary price pressures felt in the generic drug division. Teva has been relatively powerless in stopping the trend. We had removed the shares from the Best Ideas Newsletter portfolio well before the last leg down, and the Dividend Cushion ratio warned of tremendous risk to the sustainability of the dividend far in advance. By Alexander J. Poulos and Kris Rosemann Generic Drug Deflation Teva Pharmaceuticals (TEVA) maintains its position as one of the world’s largest manufacturer of generic medications, but the marketplace for a generic drug differs from the market dynamics of the branded space. We view … Read more

Systemic Risk in These Frothy Times

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Let’s talk about index investing, market valuations, and mention how a few ideas in the Best Ideas Newsletter are doing. By Brian Nelson, CFA For most investors during most parts of the economic cycle, index investing (VOO), or holding a broad basket of stocks that approximate the returns of a large market index may make a lot of sense. I have always said this from the very beginning: Individual stock selection is not for everyone. What may not be well-known, however, is that index funds have experienced multi-year periods of both outperformance and underperformance relative to actively-managed funds since the dawning of the very first index fund many decades ago. I’m worried that some investors today may not have this … Read more

Analyzing the S&P SPDR Biotech ETF

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ETFs are rapidly becoming the preferred investment vehicle to gain broad exposure to a particular sector. The biotech industry is no different with two distinct ETFs dominating the niche. The article discusses the unique characteristics of the SPDR Biotech ETF to determine the merits of the idea. By Alexander J. Poulos Introducing the S&P Spider Biotech ETF The SPDR S&P Biotech ETF (XBI) is a position weighted index with the top 10 components accounting for less than 25% of the overall assets of the index (see image below). The XBI differs sharply from its primary rival the iShares Nasdaq Biotech Index ETF (IBB) which is market-cap weighted with industry stalwarts such as Amgen (AMGN) accounting for over 8% of the … Read more

Loxo Oncology Presents Compelling Data on Its TRK Inhibitors

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Image Source: Loxo Oncology The field of oncology remains an area of intense focus with a dire need for new novel therapies. Loxo Oncology generated lots of excitement with the release of its clinical data for Larotrectinib, a TRK-inhibitor for the treatment of a diverse number of tumors. By Alexander J. Poulos TRK Fusion Loxo Oncology (LOXO) is targeting new therapies that take aim at the tropomyosin receptor kinase (TRK) gene abnormalities that lead to TRK-fusion cancers. A defective TRK gene can fuse with another otherwise healthy gene resulting in abnormal growth. The newly fused cell will continue to grow leading to tumor growth.The abnormal TRK fusion gene is witnessed in a wide swath of tumors–genetic testing can help identify … Read more

The Biosimilar Revolution Remains Stymied

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Image Source: Express Scripts We remain intrigued by the potential of the upcoming wave of biosimilar versions of well-established specialty drugs. Even though we have been disappointed by recent FDA decisions, we feel it is inevitable biosimilars will enter the market. Let’s update readers on our thoughts. By Alexander J. Poulos Specialty Drug Spending The specialty drug space remains the fastest-growing portion of the overall drug spend in the US. In Medicare plans, however, the total dollars spent grew at a pace on par with inflation. The main reason for the subdued growth is the well-defined process of lower cost generic utilization. The average consumer is well-educated on the cost effectiveness of a generic alternative and shows little resistance to … Read more

Bristol-Myers Squibb Disappoints

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Shares of Bristol-Myers Squibb have come under intense selling pressure off the heels of disappointing performance at ASCO. Let’s examine the situation. By Alexander J. Poulos What is ASCO? ASCO is an acronym for the American Society of Clinical Oncology, the premier organization for oncologists. ASCO typically holds its annual meeting in early June, which holds particular appeal for biotech (IBB) investors. Biotech outfits will often use the annual meeting for a full disclosure of study data, which can have an outsized impact on equity prices. The ASCO effect on Bristol-Myers Bristol-Myers Squibb (BMY) was the darling of the 2013 ASCO event, revealing stunning data for its flagship compound Opdivo. The equity took off leading into and well after the … Read more

Alexion’s Executive Departures and an Update from Regeneron Pharma

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Image shown above: Performance of Regeneron since the summer of 2013. An executive scandal continues to mar the performance of Alexion Pharmaceuticals. The CFO has resigned his position effective the end of August, but there is more to this story. Let’s also talk Regeneron. By Alexander J. Poulos We continue to admire innovative companies in industries that can have a meaningful impact on our everyday lives. Valuentum’s Best Ideas Newsletter portfolio, for example, houses a number of technology firms that have become ubiquitous in our daily lives. We admire such companies, but while also innovative, entities in the mid- to large-cap biotech industry (IBB, XLF) can be considered much more risky on a fundamental basis than any newsletter portfolio holding, … Read more