"wrong" or "early" or "other"... Biotechs driven by fun-durr-mentals like everything else.
As Bloomberg reports, perhaps there is a limit it this insanity...
Demand for options tied to declines in an exchange-traded fund tracking the companies rose to the highest level in three years relative to bullish ones, according to data compiled by Bloomberg. The Nasdaq Biotechnology Index has risen 549 percent since March 2009, including a 3.8 percent advance last week.* * *
Interest in bearish options on drug developers has jumped in the last year after the group was called out as overvalued by Federal Reserve Chair Janet Yellen on two occasions. Biotechs are selling stock at a pace not seen in a decade and one concern is that something will disrupt the money spigot.
“The sector is dependent on capital that might shy away at the first sign of weakness,” Goldman Sachs derivatives strategists Katherine Fogertey and John Marshall wrote in a June 17 client note. “Recent pipeline setbacks have increased concern of this going forward.”
Biotech companies are doing follow-on stock offerings at the fastest pace in more than 10 years. In the first quarter, biotech and pharmaceutical companies used 93 share sales to reap $18.7 billion, three times more than in 2014, according to data compiled by Bloomberg.
Be careful...
“Biotech stocks have had a speculative fervor to them for some time now,” Todd Lowenstein, who helps manage $16 billion at HighMark Capital Management Inc. in Los Angeles, said by phone. “Of any part of the market, this is the one with the most bubble-like characteristics, without question.”Or Buy buy buy...
“The customer base for biotech won’t stop buying,” Warren, who manages more than $100 million at Exton, Pennsylvania-based Warren, said by phone. “This sector is probably the best-placed to get any kind of growth, and it’s not going to go away quickly.”Please share this article
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