Big chance to buy biotech?
In fact, biotech stocks have been so strong that “you could see these stocks off another 10 percent from here, and still be in an uptrend,” Johnson said. “We’d be buying these names on the pullback.”
The fundamentals also remain supportive of biotech, says David Seaburg, head of equity sales trading with Cowen & Co.
“From a valuation perspective, this is not a bubble. I hear that being yelled out all the time. I mean, we are not in a biotech bubble, period,” Seaburg said.
“If you look at the 2016 earnings growth rate, it’s 16 percent for large-cap biotech names, and for the S&P it’s 12.5 percent. Biotech deserves a premium multiple.”
And a premium multiple Biotech has. The AMEX Biotechnology Index is trading at a forward price-to-earnings ratio of 53.1, versus the S&P 500’s price-to-earnings ratio of 17, per FactSet.
According to Credit Suisse, biotech has beaten each of the S&P 500 sectors for the past four years, and is looking to repeat the feat in 2015.
Nonetheless, “I’m still a buyer of this group,” said Seaburg.
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