Nasdaq 5,000: The cure or curse for biotech stocks – CNBC.com

The Nasdaq composite remains heavily weighted toward technology, thanks to Apple’s record market valuation near $750 billion. But tech’s weighting is down sharply from the Nasdaq’s peak, while the financial, consumer services and health-care sectors have seen their weightings more than double within the composite. [See table below.]

Health care’s weighting in the composite is now 16 percent, which is comparable to the sector’s weighting within the S&P 500, but on the Nasdaq it is overwhelmingly dominated by biotech.

The Nasdaq biotech sector has more than doubled since its March 2000 peak, consistently notching historic highs. Year to date, the Nasdaq iShares Biotechnology ETF is up 12 percent, gaining more than double in percentage terms than the Nasdaq 100 ETF, the Powershares QQQ trust.

The outperformance has attracted more interest from both retail and professional investors.

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In 2014, about 50 tech-focused mutual funds tracked by Morningstar saw net inflows of just more than $1 billion. Meanwhile, net inflows to a half dozen biotech mutual funds topped $1.4 billion last year, according to the independent investment research firm.

Investors have also been keen to scoop up biotech IPOs at record levels. About a third of all initial public offerings in 2014 were biotechs, according to Renaissance Capital. Nearly half of them were still in early stage preclinical trials, and a quarter were focused on oncology.

“They can’t all cure cancer,” said Renaissance research analyst Matt Kennedy, who sees a bit too much exuberance in the sector. “History may not repeat itself with another dot-com bubble, but the fervor over biotech IPOs sounds familiar.”

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Nasdaq 5,000: The cure or curse for biotech stocks – CNBC.com