Wall Street Loves Rumors

Well, maybe we all do. Of course one announced potential transaction puts many small outfits in the sector or group in play according to the rumor mill.

Over the weekend I have been reading about these rumors in Biotech. It began with Roche buying InterMune. Some of the rumors I red about included: (ACHN) Aachillon Pharmaceuticals, (ICPT) Intercept Pharmaceuticals, (PBYI) Puma Biotechnology, and (RCPT) Receptos.

The Morningstar biotechnology industry group is part of the Healthcare/Drug sector (MG516)

Screen Shot 2014-09-01 at 2.40.34 PM

The first question I try and answer are all the the stocks mentioned biotechnology companies, at least as defined by Morningstar.  Go to Databases/Charts in the navigation, then toward the bottom of the page you will notice:

Screen Shot 2014-09-01 at 2.45.17 PMUtilizing the third bullet point above search by ticker symbol. I did this for each of the four and pasted it into Excel and below is a picture:

Screen Shot 2014-09-01 at 3.55.36 PMClick the above picture for a full sized image!

Three of the four are in the biotechnology industry group while one (ICPT) Intercept Pharmaceuticals is in the industry group Drug Manufacturers – Major.

If I go to the Excel Databases and pull up both the Sectors and the Industry Groups looking at the relative strength data I see the following, first the Sector: Click for larger image:


Now the Industry Group:


Both the sector and the industry group have performed exceedingly well Sector + 18% year to date and the group 23%. Both are in up trends regardless of the time frame. However, beginning around April of this year and even through the recent sharp run up the Relative Strength rate of change has gone from Overweight to Market Perform to Underweight (in July).

Underweight has a confusing connotation to it., It does not mean look for that sector or group to go down. Look for it to under perform the overall market. In other words if the market is up 4% this area might be up only 3%. If the market declines 4% they might decline 5%.

Of course it might be only a rest is required for a period of time.

Talking Points and Markets Going Higher Near-Term Despite Volatility:

Beating the Market, as a Reachable Goal (NY Times)
Is A Big Pop Coming In Tech Stocks? (Short Takes)
Stocks Are Red Hot. Investors Are Cold Sober (Bloomberg)
What Kind Of Investor Are You? (Sigmund Holmes)
9 Habits That Lead to Terrible Decisions (HBR)
Market Champagne Sits on Ice (Sidoxia)
100 to 1 in the stock market (Seeking Wisdom)
Does the New Bond Market Conundrum Tell Us Anything? (The Equitablog)
The Quote Stuffing Trading Strategy (Nanex)
Why Citigroup would be better in bits (Reuters)
Google’s Self-Driving Cars Still Face Many Obstacles (MIT Technology Review)
Rational Exuberance (Servo)
Movement to Declassify 9/11 Information Gathers Momentum (Washington’s Blog)
Buying Insurance After a Disaster Strikes (A Wealth of Common Sense)
What Can a House Majority Leader Do for a Bank? (Bloomberg View)
The European Central Bank Is a Crawling Tortoise — Six Years Behind the Curve on Stimulus (The Independent)
Apple Partnering With American Express on New iPhone Payments System (Re/Code

Markets Going Higher Near-Term Despite Volatility

Have a Great Day!