“IBB” – the iShares Biotechnology ETF has already recovered about 30% over the past five months but Jefferies’ Michael Yee is convinced it still has more room to the upside.
Yee sees several catalysts that could potentially push these stocks further up in the coming months.
To begin with, biotech had a strong third quarter and more importantly, notable names in this space raised their guidance as well. That signals continued strength. Yee is also bullish because:
The visibility on cancer drugs and new diabetes drugs and new obesity drugs is pretty [clear] over the next twelve months. So, we think it’s been a great place to be, but we still think there’s more to go.
On top of that, inflation seems to be coming down as Invezz reported here. In response, if the Fed chooses to “pause”, it will create a better macroeconomic environment for the biotech stocks as well.
Versus the start of 2022, IBB is still down more than 10%.
And that makes up for another reason why Yee recommends investing in this exchange-traded fund. On CNBC’s “Power Lunch”, he said:
These stocks were super cheap. Even though they’re up 30% to 40% off the bottom, they’re still not expensive. So, we still think there’s room to go.
In terms of individual names, he’s particularly bullish on the likes of Gilead Sciences Inc (NASDAQ: GILD) that’s still trading well below the average of its price-to-earnings ratio for the past five years.
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