Biotech Rally Sends Nasdaq To 9000: ETFs In Focus

The S&P 500 and Nasdaq indexes hit fresh record highs on Dec 26 on U.S.-China trade deal hopes. The deal is widely expected to be signed in early January. Robust holiday season sales that benefited Amazon.com Inc. (NASDAQ:AMZN) (mainly) (up 4.45% on Dec 26) and Apple Inc. (NASDAQ:AAPL) (to a large extent) (up 1.98% on Dec 26) also helped the indexes, as part of a mighty Santa rally. After all, e-commerce sales hit a record high this year.

With this, the Nasdaq hit a milestone of 9,000 on Dec 26. The tech-heavy index took less than one-and-a-half-year to add 1,000 points as its last milestone of 8,000 was touched on Aug 27, 2018.

But if you really want to know the contributors to the latest 1,000-point gain, you would be surprised to see that there is hardly any big tech giants (which the Nasdaq index is renowned of). In fact, biotech companies returned stupendously since late August 2018.

Inside the Performance of Big Tech Stocks Since 8,000-Mark

Definitely, Apple and Microsoft (NASDAQ:MSFT) deserve special thanks for the Nasdaq’s performance this year as the stocks added 83.6% and 55.6%, respectively, and the index is heavy on the duo. But since Aug 27, 2018, the performances had been somewhat muted.

Since then, Apple and Microsoft were up 33% and 44.8%, respectively, while other biggies like Facebook (NASDAQ:FB) (up 17.1%), Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG) (up 9.5%), Intel (NASDAQ:INTC) (up 23.7%) and Cisco (NASDAQ:CSCO) (up 2.7%) haven’t rallied that much.

Biotech Overwhelms

On the other hand, some biotech stocks simply prevailed in the index. This high-growth, high-risk sector has seen its best-ever start to a year in 2019 in seven years. Solid mergers and acquisitions, especially in the cancer treatment domain, positive drug data, upbeat financials and decent valuations are making the space a clear winner (read: Will Biotech ETFs Excel in Election Year Post a Surge in 2019?).

Growing usage of AI and robotics in the healthcare space, rapid developments in the genomics market and huge demand for cancer research have kept the momentum alive throughout this year. Below we highlight a few biotech stocks under the Nasdaq that have posted solid returns since Aug 27, 2018.

Axsome Therapeutics Inc. (NASDAQ:AXSM) – Up 4107.5%

The Zacks Rank #3 (Hold) biopharmaceutical company is focused on developing novel therapies for the management of pain and other central nervous system disorders. Its product candidate portfolio consists of AXS-02 and AXS-05 which are in clinical trial stage. It belongs to a favorable Zacks industry (placed at the top 26% of 250+ industries).

Kodiak Sciences Inc. (NASDAQ:KOD) – Up 646.9%

The Zacks Rank #2 (Buy) operates as a clinical stage biopharmaceutical company. It specializes in novel therapeutics to treat chronic and retinal diseases. It hails from a favorable Zacks industry (top 26%).

Avita Medical Ltd. (NASDAQ:RCEL) – Up 470%

The Zacks Rank #2 medical technology company develops and distributes products in Regenerative and Respiratory Medicine. It belongs to a favorable Zacks industry (top 39%).

Constellation Pharmaceuticals Inc. (NASDAQ:CNST) – Up 395.5%

This is a Zacks Rank #3 bio-pharmaceutical company that discovers and develops molecule therapeutics for the treatment of cancer, inflammatory and immunologic disorders. It belongs to a favorable Zacks industry (top 26%).

Cassava Sciences Inc. (NASDAQ:SAVA) – Up 332.3%

The Zacks Rank #1 (Strong Buy) company is focused on the early detection and treatment of neurodegenerative diseases, such as Alzheimer's. It also belongs to a favorable Zacks industry (top 26%).

ETFs in Focus

While the aforementioned stocks do not have much exposure to the ETF world, Invesco DWA NASDAQ Momentum ETF DWAQ,Virtus LifeSci Biotech Clinical Trials ETF (ASX:BBC) and SPDR S&P Pharmaceuticals ETF (HN:XPH) have exposure to Axsome Therapeutics.

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>