Biotech’s Spring Into Summer Event
Jay Kaeppel | May 18, 2018 12:55AM ET
Okay, I suppose it would have been helpful to highlight this one a little sooner, but since the purpose of this blog is to “educate” and not to “prompt trading actions” I guess anytime is a good time, right?
Fidelity Select Biotech fund (ticker FBIOX) stocks bounced off of a low in April after falling 18% in less than a month. So far in May it is up almost 6%. An investor aware of the seasonal tendencies in biotech stocks would not be surprised by this development. For as it turns out, May, June and July are often (although importantly, not always) something of a “sweet spot” for biotech stocks.
FBIOX Spring into Summer
Figure 1 displays the growth of $1,000 invested in FBIOX only during the months of May, June and July every year since the fund started trading in 1986.
Figure 1 – Growth of $1,000 invested in FBIOX during May, June and July; 1986-2017
Figure 2 displays the year-by-year results.
Figure 2 – Year-by-Year FBIOX May-July %+(-)
Figures to note regarding FBIOX during May through July from 32 years of data:
*UP 20 times (63% of the time)
*DOWN 12 times (37% of the time)
*Average Up = +13.4%
*Average Down = (-6.7%)
*Median Up = +13.7%
*Median Down = (-5.0%)
*Maximum Up = +22.9% (1999)
*Maximum Down = (-18.3%) (2002)
Summary
Clearly biotech stocks have “tended” to perform well during this time of year. Yet, it is also clearly not a “sure thing” and as the 2002 results highlight, there is always risk in the markets.
The purpose of this article is not to try to induce you to buy biotech stocks. The purpose is to highlight;
Jay’s Trading Maxim #27: Long-term investment success is not about finding “sure things” but about finding a slight edge here and there and exploiting it ruthlessly and repeatedly.
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