I'm Buying These Biotechs as Dip Buyers Get Scared by Ugly Market
As I start a little shopping, I'm watching stocks that are holding up better than the high-P/E names.
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After the carnage on Friday, there was some brief stabilization at the open on Monday, but it didn't last long. Growth stocks were pounded again, with the Innovator IBD 50 ETF FFTY being sucker punched for another decline of 3.6%. High P/E names such as Palantir Technologies PLTR, Applovin APP, and Dutch Bros BROS are leading to the downside. The Magnificent Seven MAGS is down 0.9% but holding up slightly better than some other areas.
Overall breadth isn't horrible at around 3,600 gainers to 5,500 decliners, and there are only about 200 new 12-month lows. Small-caps have a little relative strength, with the Russell 2000 only down about 0.7%.
The problem currently is that the dip buyers have been scared away. They don't want to do any buying until someone else steps up first. There was some minor interest at about 45 minutes into the session, but there are a lot of stuck longs that want a chance to reduce some positions into strength.
I'm watching stocks that are holding up better than the high-P/E names. A few biotechs and other small stocks with good fundamentals and non-stretched valuations are on my radar.
I've added to Xeris Biopharma XERS, which is a favorite, and one name I particularly like is BridgeBio Pharma BBIO. It has had very good news flow lately and is consolidating around $36-37.
BridgeBio Pharma is a biopharmaceutical company focused on developing and delivering transformative medicines for patients with genetic diseases and cancers with clear genetic drivers. The company's pipeline consists of over 20 development programs ranging from early discovery to late-stage development. Its key pipeline asset is Attruby, which received FDA approval in November for treatment for transthyretin amyloid cardiomyopathy (ATTR-CM). BridgeBio has late-stage programs for limb-girdle muscular dystrophy, autosomal dominant hypocalcemia type 1, and for achondroplasia, and also has an oncology pipeline.
BBIO stock has reacted very favorably to news that as of February 17, 1,028 unique patient prescriptions for Attruby have been written by 516 unique prescribers. This is far above expectations and has caused analysts to reiterate buy recommendations and raise prices targets to an average of $54.45, with a high target of $95 from Cantor Fitzgerald.
Technically, the stock has formed a cup-with-handle pattern over the past year. The stock popped up on its earnings report on February 20 but was unable to gain momentum, likely due to poor market conditions. It held up well on Friday when the broader market was hit hard and is showing signs of strong underlying support.
This is a very ugly market, but eventually, it will produce a new crop of very good opportunities.
At the time of publication, Rev Shark was long XERS and BBIO.
