Back to Biotech

08/06/2014 12:00 am EST

Focus: ETFs

Nicholas Vardy

Editor, Bull Market Alert, The Alpha Investor Letter, and The Global Guru

Big biotech market leaders have been blowing analysts’ estimates out of the water; our latest recommendation is a broad-based and diversified bet on the US biotechnology sector, explains Nicholas Vardy, editor of Triple Digit Trader.

The ProShares Ultra Nasdaq Biotechnology (BIB) corresponds to twice (2x) the daily performance of the underlying Nasdaq Biotechnology Index.

Big biotech such as Biogen Idec (BIIB) and Gilead Sciences (GILD) easily beat second-quarter earnings estimates. Gilead makes up about 8.3% of the Nasdaq biotech index. Biogen Idec accounts for 7.18%.

Biogen earnings rose 52% versus a year earlier to $3.49 a share, topping analysts' consensus by 66 cents. Sales grew 40% to $2.4 billion versus the Street's $2.16 billion.

Gilead earnings vaulted 372% to $2.36 a share, beating estimates by 58 cents. Sales leapt 136% to $6.53 billion, topping views by $67 million.

With these kinds of blowout numbers, it’s now clear that the spring sell-off in the biotech sector was extremely overdone.

The recent blowout earnings reports give us every reason to get back in as the entire biotech sector regains its mojo.

From a fundamental perspective, there is little doubt that the Nasdaq biotech index is comprised of some of the fastest-growing large-cap stocks in the United States. And when these are all beating analysts’ estimates, well, it’s hard to go wrong.

I expect that the recent blowout earnings by the big biotechnology stocks will refocus attention on this fast-growing sector.

The biotech index should regain its March highs over the coming months. Buy ProShares Ultra Nasdaq Biotechnology at market.

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