The Biotech Revaluation Is On

 | Apr 17, 2013 | 6:20 AM EDT
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They came right back yesterday. It was as if they didn't skip a beat, aided by the fine results by Johnson & Johnson (JNJ) and Coca-Cola (KO).

It was as if they had a Food and Drug Administration buy program. Of course, the yield hunters went right after stock like Eli Lilly (LLY) and GlaxoSmithKline (GSK) and the now perennial 52-week-high AstraZeneca (AZN), the latter totally undeserving of the honor given its poor performance of its actual business as opposed to its stock.

But what I find so astounding isn't the strength in the classic, somewhat high-yielding soft goods stocks but the amazing resilience of the stocksthatgoupeveryday. I am making that one word, because it is the new title I am using for Gilead Sciences (GILD), Biogen Idec (BIIB), Celgene (CELG) and, perhaps most stunningly, Regeneron Pharmaceuticals (REGN).

Now each of these companies has some terrific drugs in the works. There are novel formulations and terrific pipelines. That's terrific, but I have to tell you that this everyday revaluation -- one I warned you about when I suggested you buy calls on these stocks -- is pretty stunning.

Regeneron in particular, is most amazing. It has a terrific ophthalmological pipeline as well as the blockbuster Eylea, and it has a potential for a brand-new anti-cholesterol franchise that isn't based on statins, for those who can't tolerate them.

Everyone wants yield because of the scarcity of bonds that give you anywhere near even the reduced yields that Procter & Gamble (PG) and Clorox (CLX) give you.

But what the growth mutual funds want is growth that can't be pinned down and isn't even crimped by European formulations, which had been the worry for, say, Celgene not that long ago. And these four horsemen have it.

Perhaps the best way to think about this is to recognize that these stocks are the anti-gold. Anything that could drive up gold is bad for biotech. Anything that can drive it down is good. So next time you see gold swoon and take down the whole market, we now know the total handbook for the moment: Buy more deep-in-the-money calls on Biogen Idec, Gilead Sciences, Celgene and Regeneron.

These four stocks remain THE go-to stocks on any geopolitical/terror weakness in this market.

Random musings: You can see these biotech animal spirits at work on a smaller scale in Acorda Therapeutics (ACOR), which reported a potential, just a potential, breakthrough in stroke treatment, where some of the losses from a stroke might be able to be rolled back. That stock, ACOR, was up $4 today after being up almost $4 yesterday on the breakthrough. Frankly, the news is so breathtaking, I still don't think the move is over yet.



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