This biotech ETF sees ‘breakout’ while U.S. small-cap technology stocks lag – MarketWatch

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Some exchange-traded funds (ETFs) that buy biotech stocks are poised to rise in 2024.

In addition to the $8 billion SPDR S&P Biotech ETF Both showed significant increases in February. And so far this year, Aniket Ural, head of ETF data and analysis at CFRA Research, said in a phone interview Thursday.

Ural said the SPDR S&P Biotech ETF has seen “fairly strong flows” over the past month and is “not off the charts” despite this month’s jump in performance. The fund’s stock price soared 12.6% in February, up more than 10% year-to-date, according to FactSet data.

“We’re seeing key components of small-cap stocks, such as biotech stocks and retail stocks, now breaking out to two-year highs. We believe this bodes well for the small-cap index itself,” Technical Research said. Director Jeff DeGraaf said. Renaissance Macro Research, in a Thursday memo.

The SPDR S&P Biotech ETF and SPDR S&P Retail ETF XRT are “coming off a big base” with “internal momentum,” DeGraaf said. “In both groups, he is one of the top performers in this zone on our Russell 2000 market cycle watch.”

The Russell 2000 Index, a gauge of small-cap stocks in the United States, has risen 1.4% since the beginning of the year through Thursday. Small-cap stocks have lagged far behind U.S. large-cap stocks, as measured by the S&P 500 index SPX, which is up 6.8% through 2024, according to FactSet data.

Meanwhile, shares of the $12 million Virtus LifeSci Biotech Clinical Trials ETF soared 18.5% in February, bringing the year-to-date gain to 23%. The ALPS Medical Breakthrough ETF, which has $125 million in assets, is up 11.6% this month and 12.5% ​​through 2024.

The much larger SPDR S&P Biotechnology ETF seeks to track an equal-weighted index of U.S. biotech stocks, and its largest holding as of February 28 was Viking Therapeutics.

VKTX,

Ivans Biotherapeutics Co., Ltd.

IOVA

and Cytokinetics, Inc.

CYTK,

According to data on the State Street Global Advisors website.

read: Viking Therapeutics’ stock more than doubles as investors welcome cheap entry into weight-loss drug boom

Analysts at Fairlead Strategies, led by the fund’s founder Katie Stockton, said the fund had “experienced a healthy breakout period, rising above January highs and resuming a long-term recovery phase.” ,” he said in a Feb. 27 memo. It’s almost $105. ”

SPDR S&P Biotech ETF shares fell 3.1% to $98.42 on Thursday.

In terms of capital flows, the SPDR S&P Biotech ETF attracted more than $337 million last month as of Feb. 28, and has seen more than $92 million in inflows this year, according to FactSet data. There is.

Meanwhile, the iShares Biotechnology ETF IBB, which also manages $8 billion in assets, gained just 0.7% in 2024.

However, the iShares Biotechnology ETF tracks a market-cap weighted index of U.S.-listed biotech stocks, and its top three holdings as of February 28 were Vertex Pharmaceuticals Inc. Ta.

VRTX,

Regeneron Pharmaceuticals Co., Ltd.

Regnu

and Amgen

AMGN,

According to the fund’s data on BlackRock’s website.

The SPDR S&P Biotechnology ETF tracks an equal-weighted index of U.S. biotech stocks, so it has a more “small-cap tilt,” Ural said.

information technology

DataTrek Research co-founder Jessica Raab said in an emailed note Thursday that while small-cap IT stocks typically outperform small-cap stocks as a whole, “in the past “Over a 100-day period, we found the opposite results with a statistically significant difference.” .

It may mean that change is coming.

“History suggests that small-cap tech stocks should revert to their mean over the next four or so calendar months and generally outperform small-cap stocks,” Raabe said. “However, it is important to remember that this is a relative analysis, not an absolute return analysis.”

DataTrek found that the Invesco S&P Small Cap Information Technology ETF PSCT has lagged the iShares Core S&P Small Cap ETF IJR, which tracks the S&P Small Cap 600 Index SML, by 9% over the past 100 days. “This is very unusual,” Raabe said.

Shares of the Invesco S&P Small-Cap Information Technology ETF rose 0.9% in February, but are still down 3.6% so far in 2024, according to FactSet data.

The fund’s performance has lagged the iShares Core S&P Small Cap ETF’s year-to-date gain, according to FactSet data. The ETF’s shares rose 3.2% in February, capping its year-to-date loss to 0.8%.

Comparison of small-cap and large-cap stocks in the tech industry

DataTrek’s Raab said small-cap U.S. tech stocks are lagging well behind large-cap tech stocks, but “not enough to trigger a buy signal.”

The Technology Select Sector SPDR Fund XLK, an ETF that tracks tech stocks in the S&P 500, is up 4.7% this month and 7.5% year-to-date. In contrast, the Invesco S&P SmallCap Information Technology ETF is down 3.6% this year after gaining 0.9% in February, FactSet data shows.

Datatrek continues to favor large-cap tech stocks, and U.S. large-cap stocks generally over small-cap stocks, “in the current mid-cycle market environment given their global size and superior competitive advantage,” according to the company’s memo. He says he likes it. “Large tech companies are also well-positioned to continue capitalizing on structural growth trends like artificial intelligence,” Raab said.

As always, let’s take a look at the top and bottom performing ETFs over the past week through Wednesday, according to FactSet data.

Good stuff…

…and the bad points

New ETF

• regan capital Said on February 28th Announced the launch of the Regan Floating Rate MBS ETF MBSF, an actively managed fund that invests primarily in floating rate agency mortgage-backed securities.
• DWS Said on February 27th The company announced the launch of its first actively managed exchange-traded fund (ETF), XTrackers RREEF Global Natural Resources ETF NRES.
• iM Global Partners and Polen Capital Said on February 22nd Announced that it plans to launch actively managed Polen Capital International Growth (PCIG) ETF and Polen Capital China Growth (PCCE) ETF on March 8th.

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