We are now in the last quarter of the year! Just like 2020, the year 2021 was all about covid19 trades and dealing with crazy moves in the market on a daily basis really made the year go by so fast AGAIN.
Anyways, 4Q in biotech is special for many reasons- this might be familiar for institutional biotech funds/specialists, but I am sharing so that retail investors and generalists can be prepared.
4Q IS HISTORICALLY STRONG QUARTER
I am not sure why but fourth quarter for biotechs tend to be fairly strong quarters for biotech stocks.
There can be many reasons – people covering shorts into the year end could be a reason or people coming back from summer break and putting trades on could be moving stocks up (vast majority of the market is long-bias so positive capital flow leads to market moving up).
Anyways, while we are off to a rough start so far (early October), we have generally seen strong performance – making me a bit optimistic on the long side into the year-end.
4Q IS FOR PUTTING ON PRE-JPM HEALTHCARE CONFERENCE TRADES
As a background, JP Morgan Healthcare conference is the largest and the earliest healthcare conference of the year – which makes it the most important conference.
Companies tend to time their major announcements / acquisitions for JPM Healthcare conference – which is mid-January. They make those announcements and have time to explain to investors for the week.
Often you will see big acquisitions, including $BMY’s acquisition of $CELG.
Therefore, it might be nice to own some stocks in 4Q – hoping that some stocks could run up into JPM conference. I am not sure about owning through JPM – they will sell off if they don’t get acquired. However, many biotech investors might cover their shorts just in case their shorts get acquired and start the year losing money.
Many careers have been ruined by shorting some “sure-win” shorts- only to find out they got bought out by a large cap pharma – trying to be cute and play a value acquisition. Like Bioverativ acquisition. Shorts were right- $SNY had to write it off but it was too late for shorts.
Everybody learned it so they tend to cover shorts for companies that has remote chance of getting bought – they tend to keep their shorts until mid-December.
Those are 4Q biotech seasonal thematic trades – obviously there are big science conferences like ASH and San Antonio- but they are more data read-outs than seasonal dynamics.
Happy investing and NEVER FORGET TO MANAGE YOUR RISK!
*not investment advice
