A mix of choppy or nonexistent earnings alongside the promise of game-changing breakthroughs make biotech stocks a challenge for investors. The SPDR S&P Biotech ETF, now on the IBD Leaderboard watchlist, offers an alternative to betting on a single biotech name. With the XBI ETF, investors can own a basket of biotech stocks — including CRISPR Therapeutics, Moderna and Arrowhead Pharmaceuticals — with one trade.
To kick off the new week, XLB just broke out, with volume trending well above average.
A new feature story from Investor's Business Daily highlights how pharma and biotech stocks, led by Eli Lilly, Biogen and Crispr, are setting up for significant gains as the new year begins. Multibillion-dollar deals and upbeat clinical results, as well as medical advances like CRISPR gene-editing hitting its prime, are fueling the biotech boom.
Google-parent Alphabet also recently announced strategic research collaborations with Eli Lilly and Novartis. Through Isomorphic Labs, a unit of Alphabet, Lilly and Novartis collaborations will focus on small-molecule treatments and multiple targets.
Splashy takeovers to kick off the new year also spur Wall Street interest in pharma and biotech stocks. Johnson & Johnson, Merck and Boston Scientific just announced takeovers topping a combined $3 billion in value.
Shortly before Christmas, Bristol Myers Squibb announced it will acquire Karuna Therapeutics. News of that takeover sent KRTX stock soaring more than 47% in one day.
XBI ETF's Top 5 Holdings
Broadly diversified across the biotechnology sector, the XBI ETF offers investors a way to tap the renewed strength in biotech stocks without committing to a single company.
As a result, it generally contains a larger number of small cap and midcap names vs. a rival ETF such as IBB, the iShares Nasdaq Biotechnology Fund.
| Company | Symbol | Weight | Comp Rating | EPS Rating | RS Rating | Ind. Group RS | A/D Rating |
|---|---|---|---|---|---|---|---|
| Cytokinetics | 3.15 | 74 | 9 | 99 | A+ | A+ | |
| Karuna Therapeutics | 1.76 | 74 | 11 | 97 | A+ | A | |
| Arrowhead Pharmaceuticals | 1.66 | 66 | 10 | 87 | A+ | A+ | |
| Arcadia Biosciences | 1.66 | 4 | 52 | 6 | D | D- | |
| Moderna | 1.59 | 30 | 4 | 18 | A+ | A- |
Source: State Street Global Advisors SPDR and Investor's Business Daily
XBI Launches Fresh Breakout
Reflecting the promise of a bright 2024 outlook for biotech stocks after two years of abysmal performance, the XBI ETF continues to build on a sharp rise in the right side a long, 46-week double bottom.
The biotech ETF has just shot past a 90.91 buy point. The 90 to 95 level has marked resistance for the XBI ETF, so look for it to decisively clear that price range.
Follow Matthew Galgani on X (formerly Twitter) at @IBD_MGalgani.
