News Mentions & Press Releases
Biotechnology stocks were some of the strongest performing stocks from 2009-2015. Then, the biotech bubble burst and just about every major biotech stock plunged into a private bear market. Since then, biotech stocks have bottomed and are now rallying once again. Valuations and sentiment have been reset which opens the door for higher prices. That said, here are two common mistakes investors make when investing in biotech stocks.
Avoid The One Hit Wonders:
Biotech companies come in all different shapes and sizes. One big mistake investors make is that they see a company with one hot drug and they think that is enough to change the world. The problem many companies face is that they need to innovate to stay relevant in the long run. I spoke to Joshua D. Goldman, PhD, CFA who is a Partner and Director of Research at Taylor Wealth Management Partners and he prefers to avoid companies with only one drug candidate and told me, “An investor should favor companies that have a core technology which is already proven safe and potentially hints at being effective i.e. a therapy based on this core intellectual property has already made it beyond phase I and hopefully phase II clinical trials. This should increase the chance that other drugs based upon the same core intellectual property are also safe. If there are many drugs in the pipeline based on the same platform, than an investor has “many shots on goals” thereby increasing the likelihood of success.“
Netflix is an impressing stock. Despite some recent turbulence, its returns make even its FANG (Facebook, Amazon, Netflix, and Google parent Alphabet) counterparts pale in comparison — a 10-year annualized return of 59% (that’s more than 10,000% cumulative)! All the FANG (or FAANG or FAAMNG) names have been remarkable for investors; although, it’s unlikely many have weathered the volatility. Each FANG stock has had a drawdown of more than 60% (except Facebook, which went public most recently and has only had a 40% drawdown so far), with three members experiencing peak-to-trough declines of 80% or more. But despite those large drawdowns, investors are attracted to the allure of picking a lottery stock or two and sailing off into the sunset.
Without the benefit of hindsight, how realistic is investing in a Netflix, say 10 years ago, and holding that stock until today? In investing, time is very much your friend. It’s often shown that over long periods, say 10 years or more, stocks are positive an overwhelming majority of the time, which is true and great! But that analysis is typically based on broadly diversified index returns. Choosing a less diversified group of individual stocks can become more challenging than many think, even with time on the side of investors.
Don’t let two bad seeds ruin your obsession for some FAANG stock components.
Facebook (FB) just had its version of Black Monday. The social media giant posted lower than expected user growth in the second quarter, prompting panic from a market obsessed with red-hot FAANG stocks. On Thursday, The Facebook had the single worst day in stock market history, shaving off over $120 billion from its market cap as the tech bellwether’s stock dropped over 20%.
Facebook wasn’t the only high-growth (but slowing…) tech stock to tumble, however. It took the rest of FAANG down with it. Even Alphabet (GOOGL), which had posted earnings that handily beat the day before, dove into the red.
“I think of the FAANG stocks as a game of great expectations. Facebook’s earnings announcement marked a break in those expectations,” said Joe Smith, senior market strategist for CLS Investments.
Baron Rothschild is credited with some timeless advice. “The time to buy is when there is blood in the streets.” As volatility returned this year, it brought shaky investor sentiment back into play. Coming into 2018, U.S. valuations were extremely high, and that didn’t change after a period of strong earnings. Meanwhile, international valuations have been much more attractive. But through the first half of the year, the U.S. has continued its outperformance. That seemed to be amplified during the second quarter as the S&P 500 outperformed the MSCI ACWX by more than 6%.
Digging a little deeper uncovers some interesting prospects. Individual countries followed the S&P much more closely, and some outperformed it. Two countries in a great position for further outperformance are Canada and the United Kingdom. The iShares single-country ETFs (EWC and EWU) give broad exposure to their equity markets. We believe negative sentiment has investors missing the train on some extremely attractive investment opportunities with these two ETFs.
Smart beta ETFs are generally geared for outperformance. They invest in pools of securities with a rules-based methodology that can be hard to beat. But as an ETF investor, it can be difficult to objectively evaluate smart beta ETFs with so many available in the marketplace and relatively small sample sizes used to compare live performance.
The idea behind modeling factors is that it can avoid some of these challenges by decomposing an ETF’s holdings based on common risks likely driving returns. However, the challenge for most investors is that they either a) don’t have access to cost-effective tools that provide them this type of portfolio lens and b) the output of such an analysis is not as intuitive as comparing excess returns versus a benchmark. Assuming an investor can get over these hurdles, the question is simple: Should a smart beta ETF behave the way the label suggests it will?
If you truly believe in Dell’s comeback and looming IPO, there are several ETF options.
Goldman Sachs Hedge Industry VIP ETF (GVIP – Get Report) holds 2.6% of Dell Technologies Inc. (DVMT) , iShares North American Tech-Software ETF (IGV – Get Report) has 2.25%, and SPDR Kensho Future Security ETF (XKFS) with 1.91%.
It’s not the Round Rock-based company’s computer hardware business that may make a Dell-linked ETF attractive, but rather it’s stake in the cloud-computing provider and server virtualization leader, VMware (VMW – Get Report) . The company continues to grow, spurred by a deal with Amazon.com Inc. (AMZN – Get Report) to develop a new cloud service for Amazon Web Services. As cloud services gain more popularity in tech, ETFs will want to capitalize on the new tech trend by favoring certain stocks.
“Nothing? Who do you think you’re dealing with? Nothing costs nothing.” — Terry Benedict, Ocean’s Twelve (2004)
One of the biggest advantages of exchange traded funds (ETFs) over mutual funds (MFs) is lower expense ratios. Since ETFs are primarily index-based, and many have similar exposures, one of the most common ways firms compete is by lowering fees. Thus, newly launched ETFs have been undercutting existing fund expense ratios. In turn, issuers of the existing funds have been cutting their fees to stay relevant. This has generated a vicious cycle, which has come to be known as “the race to zero.” This race has been a net benefit to investors, and if you are a thrifty shopper like me, ETFs have become that much more appealing.
But the rise of ETFs and their huge asset growth have turned some heads in the MF world, particularly as some of that growth has been at the expense of MF assets. In response, it appears MF managers have followed suit and begun to reduce expenses and shift focus to index products to remain competitive. I have prepared an evaluation of expense growth over time for equity MFs and ETFs. But first, let’s take a look at growth in the number of funds and assets to gain a better insight of market trends.
TD Ameritrade is expanding its Model Market Center geared toward advisors by including models from CLS Investments. In a press release, CLS Investments said its CLS-managed American Funds and AdvisorOne Fund models are now available on TD Ameritrade Holding Corporation’s (AMTD) Model Market Center platform. The platform launched earlier in 2018, enabling registered investment advisors (RIAs) that use the company’s institutional platform to tap into the minds of money managers without any of the complexities associated with outsourcing portfolio construction.
1. ESG and SRI — How they’re different
Environmental issues are more relevant (and trendy) than ever. Protecting and preserving the environment has become a focal point in modern politics — and it’s slowly but surely creeping into the investing world.
Situations like the BP (BP) oil spill in the Gulf of Mexico and the Volkswagen (VLKAY) emissions debacle have spurred consumers’ demands for corporate responsibility — not to mention an urgency among companies who want to protect their reputations (and share prices).
Environmental, Social and Governance (ESG) criteria is a hot buzzword among the investing community and is often considered to be the next iteration of Socially Responsible Investment (SRI).
Both ESG and SRI have their proponents and detractors — and, while they’re often part of the same conversations, ESG and SRI are differing concepts with differing criteria.
Kostya Etus, a portfolio manager specializing in ESG and SRI strategies at CLS Investments, an Omaha-based investment management firm, explains that SRI is a traditional, exclusionary screening method to avoid “‘sin stocks,’ such as those in the tobacco, alcohol, and firearms industries.” As the crusade against “sin stocks” became less of a focal point, and environmental issues came into the spotlight, SRI as a philosophy gave way to ESG.
The explosive growth within the ETF market has been spurred by the numerous benefits ETFs offer over traditional mutual funds. One oft-forgotten improvement is the ability to trade option contracts. Options can be used to generate income, manage risk, speculate, and even help navigate tax issues. Given the benefits of the ETF structure and added flexibility, it may be surprising to learn that options on ETFs have been stagnant for years by a variety of measures.
In the early days of ETFs, many funds arguably were — and still are — trading vehicles. As a result, options were commonly listed on these early ETFs, and their option markets became quite robust. In fact, of the first 100 ETFs launched, at least 87 had listed options. This trend continued for a number of years, and by late 2006 nearly three-quarters of all ETFs launched had options available.