Cowen: With NASDAQ Index Up 33%, Biotech Remains a Winner

December 1, 2014

By Riley McDermid, BioSpace.com Breaking News Sr. Editor

Biotech remains a winner across the board headed into the end of the year, with interest in the sector remaining strong and investors from Main Street to Wall Street strongly vest in the sector, a new analyst note from the biotech team at Cowen and Co. said Monday.

“The NASDAQ Biotech Index is up 33 percent year-to-date and near its all-time highs, generalist fund managers appear inclined to chase winners, and performance, into year end,” wrote the team in a note to investors. The analysts said that focus has broadened from beyond “the top six or seven large-cap” names to any mid- or small-cap stock with a good story.

“As biotech stocks have outperformed, generalists have abandoned questions about ‘how do we value this stock today’ in favor of ‘how big of a concept could this be in the future,’” said Cowen.

However, amongst specialists, it appears that some year-end fatigue has set in, wrote the team. “Many are a bit worn out from all the excitement of 2014, the ups and downs in stock performance, and are looking forward to closing the books on a good year. Interest from hedge funds in particular seems to have waned, as is typical for this time of the year,” said Cowen.

But specialists still remain “keen to discuss 2015 ideas” and some are eager to ”jump the gun on 2015” by taking positions in December, ahead of what they anticipate will be a "risk on" rally in January.

“Appetite for investing in new IPOs is also waning into year end, in part driven by the perception that quality is increasingly scarce across new issues,” said the note. “However, interest in new technologies, platforms, and scientific advances that might hit investors' radar screen next year is very healthy, suggesting that early stage stocks will be well received if they are viewed as having strong scientific backing.”