Zico Files : You got to to be in US Biotech stocks

The two sentences in the Fed’s minutes that was released in the afternoon sent the US stock market violently reversing its earlier slide. 

First – don’t fight the Fed. And it’s not as if the rest of the global economy is chugging along. Therefore any one interested in putting money to work has to be in the US stock market.

Yes US stocks have done well. But that should never be the basis of not wading in when the opportunity beckons.

The quick and dirty approach for the US markets is to buy the ETFs, probably the Q’s. But there is more challenge in picking stocks in the US. Because it’s  the market that rewards stock picking. Let’s start with my favourite sector – Biotech.

The Biotechnology industry in the US is expected to outperform the S&P broader market substantially in 2014, 2015, and beyond as the population continues to age. Yet offshore  investors are mostly unfamiliar with this space  as there is always the risk that the products/therapies don’t work or don’t get approved by the FDA and the stock price deflates. Yes that’s a  valid concern.

So the approach most investors take is to go for a basket of biotech names which can also be implemented through the ETFs  eg. IBB US (iShares) or XBI US (SPDR) or BBH US (Market Vectors) and the list goes on.

My preferred approach – buy the leaders, a little less upside for a little more comfort and safety. And the two largest juggernauts are Amgen Inc (AMGN US) and Gilead Sciences Inc (GILD US). A little I decided that Amgen had hit my price target of 138 and so I took profits. I have re-looked at the prospects and have revised my price target. At the same time I switched into Gilead. Both stocks have weathered the recent markets’ slide very well and there is still more upside from current levels.

amgen and gilead


A Bit About Zico
Zico is our in house equity consultant who is currently a private fund manager with more than a fair share awards in the course of his illustrious career.
Having managed both global and also regional themed equity portfolios, he specialises in stock picking that maximises returns for his various absolute return portfolios.