Maybe Some Good News For A Big Biotech ETF

Biotechnology stocks and exchange-traded funds are not off to good starts in 2016. That much is highlighted by the iShares NASDAQ Biotechnology Index (ETF) IBB, the largest biotech ETF. Over the past month, IBB is lower by 23.2 percent and with Thursday's close at a handle just above $263; IBB is more than 34 percent below its all-time of just over $400 set in July.

By now, most investors have become well acquainted with volatility as it pertains to stocks to start 201,6 and that word is certainly applicable to biotechnology stocks and exchange-traded funds. Over the past month, three of the 13 worst-performing non-leveraged ETFs were biotech funds— a statistic that is made even more damning when considering January is usually a seasonally strong month for the biotech space.

Good News Found In Marquee Holdings

By way of Evercore ISI, Barron's reports that Biogen Inc BIIB, Celgene Corporation CELG, Amgen, Inc. AMGN and Gilead Sciences, Inc. GILD “are trading at their lowest collective valuation in a decade.” Image Credit: Public Domain

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There is some potentially good news for IBB, and it comes in the form of some of its marquee holdings actually looking inexpensive for a change.

That is a big deal for IBB because, in the aforementioned order, that quartet of biotech giants combines for almost 36 percent of the ETF's weight. Biogent trades “at 14 times forward earnings, the stock hasn’t been this cheap since 2011, and fetches the second-lowest price-to-earnings multiple of any biotech in the Standard & Poor’s 500,” according to Barron's.

Biogen accounts for 9.33 percent of IBB's weight, or 17 basis points more than the ETF devotes to second-place Celegene.

Although biotech stocks have disappointed investors to start 2016, that is not keeping investors away from IBB as the ETF has added $87.1 million in new assets since the start of the year. Last year, IBB's inflows were almost $798 million.

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