Thursday, February 10, 2022

Time to Buy This Beaten-Down Sector

Shield

AN OXFORD CLUB PUBLICATION

Wealthy Retirement

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Play the Coming Rebound in the Biotech Sector

Jody Chudley, Contributing Analyst, The Oxford Club

Jody Chudley

As a contrarian, I love nothing more than seeing an entire sector of stocks fall deeply out of favor.

When sellers overwhelm buyers, fundamentals are forgotten and stocks can become incredibly mispriced.

Today, my contrarian focus is locked in on the biotech sector.

Investors are fleeing biotech stocks.

In 2021, the SPDR S&P Biotech ETF (NYSE: XBI), an exchange-traded fund (ETF), dropped 35% from its February peak through the end of the year.

After that dismal performance, many folks thought that 2022 would be a rebound year for biotech stocks.

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Instead, the sell-off has intensified. The SPDR S&P Biotech ETF has already dropped another 20% this year.

All in all, the equal-weighted ETF has been cut in half since it peaked almost exactly one year ago today.

A Rough Ride for the SPDR S&P Biotech ETF
 

Talk about a chart only a contrarian could love!

Remember, after a 50% decline, a security needs to increase 100% to get back to where it started.

Even if that takes five to seven years, investors buying today in advance of the recovery would be well rewarded.

So... why have biotech stocks been beaten down so relentlessly?

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