Biotech Crushing The Market: Best ETFs & Stocks YTD

Biotechnology sector, which includes the fast-growing companies in the health care world, are easily crushing the overall market and broader health care sector so far this year. This is especially thanks to a wave of mergers and acquisitions, encouraging trends as well as the new tax legislation.

Mergers & Acquisitions

Recent mergers and acquisition talks/rumors have given a boost to biotech stocks. Celgene Corp (NASDAQ:CELG) has agreed to buy Juno Therapeutics Inc. (NASDAQ:JUNO) for $87 per share in cash, or $9 billion, while Sanofi (NYSE:SNY) announced a deal to acquire Bioverativ (NASDAQ:BIVV) for $11.6 billion.

Given the flurry of deals so far, M&A activity in the biotech sector is expected to be robust this year. EY expects the deal value to exceed $200 billion, given companies’ increased financial firepower and balance sheet strength (read: M&A Waves Pushing Biotech ETFs Higher).

Encouraging Trends

The industry is clearly benefiting from solid corporate earnings, promising drug launches, faster drug approvals, cost-cutting efforts, an aging population, ever-increasing healthcare spending, expansion into emerging markets and Trump’s tax reform. In particular, the new tax legislation has enticed companies to bring offshore cash back home at reduced tax rates of 8-15.5% instead of the prior 35%. The repatriated money could be used for share buybacks, dividends, acquisitions and capital spending.

Additionally, the sector’s non-cyclical nature is an advantage in the current environment, where concerns over higher inflation and the resultant increase in interest rates are on the rise. Geopolitical tensions, Washington turmoil as well as the prospect of an end to the worldwide cheap money policy era is also compelling investors to move toward defensive sectors like health care (see: all the Health care ETFs here).

How to Play?

All these developments are fueling growth in the biotech companies, leading to a rally in their share prices and impressive levels of momentum in biotech ETFs. This suggests that a tilt toward biotech is definitely a good idea.

Below, we highlight the three biotech ETFs & stocks that have delivered double-digit returns in the year-to-date time frame. These could be excellent plays for investors who believe that biotech will continue to move upward, and continue to lead the health care space higher in the months ahead.

Loncar Cancer Immunotherapy ETF CNCR

This product tracks the Loncar Cancer Immunotherapy Index and provides exposure to a basket of companies that develop therapies to treat cancer by harnessing the body’s own immune system. It holds 31 stocks with heavy concentration on the top firm at 9.06% while other firms account for no more than 5.82% share. The ETF has amassed $54.2 million in its asset base and trades in a lower average daily volume of around 24,000 shares. The expense ratio comes in at 0.79%. The product has soared 24.3% so far this year and carries a Zacks ETF Rank #2 (Buy) with a High risk outlook (read: Biotech ETF Hits New 52-Week High).

Virtus LifeSci Biotech Clinical Trials ETF (MZ:BBC)

This fund has a novel approach to biotechnology investing with exposure to companies that are in the clinical trial stage. This can easily be done by tracking the LifeSci Biotechnology Clinical Trials Index. BBC has amassed $43.9 million in its asset base and charges 79 bps in fees per year from its investors. It trades in a light average daily volume of around 17,000 shares and holds 84 securities in its basket with each accounting for less than 3% share. The product has gained 20.6% and carries a Zacks ETF Rank #2 with a High risk outlook (read: Top-Ranked ETFs & Stocks That Crushed the Market in 2017).

ARK Genomic Revolution Multi-Sector ETF ARKG

This is an actively managed ETF focusing on companies that are expected to benefit from extending and enhancing the quality of human and other life by incorporating technological and scientific developments, improvements and advancements in genomics into their business. The fund holds 37 stocks in its basket with none accounting for more than 9.52% share. It has amassed $93.5 million in its asset base and trades in a good average daily volume of around 60,000 shares. The expense ratio comes in at 0.75%. The ETF is up 14% in the year-to-date time frame.

Cascadian Therapeutics Inc. (NASDAQ:CASC)

This Washington-based biopharmaceutical company specializes in developing innovative therapeutic product candidates for the treatment of cancer. The stock saw no earnings estimate revision over the past 30 days and has an expected earnings growth rate of 19.16% this year. It carries a Zacks Rank #3 (Hold) and a VGM Score of D. Shares of CASC have surged 170.3% so far this year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Atara Biotherapeutics Inc. (NASDAQ:ATRA)

This California-based clinical-stage biopharmaceutical company is focused on developing therapeutics for serious unmet medical needs, with an initial focus on muscle wasting conditions and oncology. The Zacks Rank #3 stock has gained 143% this year and saw its Zacks Consensus Estimate moving up from a loss of $4.62 to a loss of $4.28 for this year. However, the company is projected to post earnings decline of 7.13% this year and has a VGM Score of D (read: 5 Best-Performing Stocks of the Top ETF of January).

Iovance Biotherapeutics Inc. (NASDAQ:IOVA)

This California-based biopharmaceutical company is focused on the development and commercialization of cancer immunotherapy products designed to harness the power of a patient's own immune system to eradicate cancer cells. The Zacks Consensus Estimate for 2018 has gone up from a loss of $1.32 to a loss of $1.28 in the past month with an estimated growth rate of 5.08%. Again, this stock has a Zacks Rank #3 (Hold) and a VGM Score of D. It has gained 137.5% in the year-to-date time frame.

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Sanofi (SNY): Free Stock Analysis Report

LONCAR CANCER (CNCR): ETF Research Reports

BIOSH-BIO CLNCL (BBC): ETF Research Reports

Celgene Corporation (CELG): Free Stock Analysis Report

Atara Biotherapeutics, Inc. (ATRA): Free Stock Analysis Report

Juno Therapeutics, Inc. (JUNO): Free Stock Analysis Report

Cascadian Therapeutics, Inc. (CASC): Free Stock Analysis Report

Lion Biotechnologies, Inc. (IOVA): Free Stock Analysis Report

BIOVERATIV INC (BIVV): Free Stock Analysis Report

ARK-GENOMIC RVL (ARKG): ETF Research Reports

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