These Pharma Stocks Could Make You Sick
Faraday Research | Jan 24, 2017 02:22PM ET
We spend a lot of time highlighting sectors and industries that are outperforming the broader market and garnering plenty of bullish headlines, but it's just as important to identify lagging market niches for long-only investors to avoid and short-oriented traders to target.
After Tuesday's rally, there are only a couple of industry groups that are actually falling so far in 2017, as the below table shows:
Source: Faraday Research
h3 Down Groups/h3Banking stocks (regional and general) are essentially unchanged on the year as the yield curve is roughly flat since January 1. That leaves Retail, Food and Beverage, and Pharmaceutical stocks as the only industries that are trading down by more than 1% so far this year. The first two are tied to the consumer and based on the recent improvements in consumer-confidence figures, these stocks will likely need a run of persistently below-expectation economic data to fall much further relative to the overall market.
The underperformance in Pharmaceutical stocks has an obvious culprit: a few weeks ago, then President-elect Donald Trump noted in his first news conference that the pharmaceutical industry was "getting away with murder" and that “Pharma has a lot of lobbies, a lot of lobbyists and a lot of power. And there’s very little bidding on drugs.” Based on this rhetoric and the potential for new regulations on the industry (one of the few that may actually face increasing regulation under the Trump administration), we believe that pharmaceuticals will continue to face major headwinds in the coming months. As a possible counterpoint, It's worth noting that Trump's Health Czar nominee, Tom Price, has previous connections to "Big Pharma" and may be more lenient than some bears fear.
h3 Longs To Avoid/h3Among the large-cap pharmaceutical names we track, Allergan (NYSE:AGN), Gilead Sciences (NASDAQ:GILD), Eli Lilly (NYSE:LLY), Bristol-Myers Squibb (NYSE:BMY) and Amgen (NASDAQ:AMGN) are showing the worst long-term momentum according to our proprietary measures. These are some names that long-only investors may want to avoid and short-biased traders may want to focus on -- at least until the sector shows signs of bottoming out.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.