Over the last five sessions, Health Care has gained 90 bps. Health Care is down ~1% over the last month and
flat over the last two months. Over the last five sessions, Generic Drugs, Biotech, Long-term Care, and Services have led, while Equipment has lagged.
Author: Raj Gupta
Raj Gupta is Director, Research Analyst.
After joining the firm in 2002 as a research analyst, Raj was appointed senior equity analyst in 2006, and lead senior equity analyst in 2014—largely because of his ability to select outperforming stocks. He acts as an expert in the O’Neil Methodology and contributes to the direction of product and service line development. He recommends securities for addition to or removal from the U.S. Focus List, or USFL, and the associated alerts to clients. During his tenure, he was part of the leadership that developed the Global Focus List, which marked the firm’s successful expansion into international equity recommendations. He is also a lead on the IPO Rewind report and contributes to weekly summaries on the performance of the U.S. market. Much of his expertise is delivered as highly customized service to clients.
RAj earned his Bachelor’s degree in Economics from the University of California, Santa Barbara. He began working at the firm directly out of college, driven by his passion for investing and stocks. An avid soccer player, he built and managed an adult league in the Los Angeles area, in which he still plays. He also enjoys international travel; he and his wife commit to at least one major adventure a year.
Market View
The U.S. market remains in an Uptrend Under Pressure. The S&P 500 and Nasdaq are both now trading slightly
below their respective 50-DMA with six distribution days each. One distribution day will expire on the Nasdaq
next Wednesday. The S&P 500 is trading ~7% off highs with the next level of support at ~3,233, while the
Nasdaq is trading ~11% off highs with near-term support at ~10,700 before ~10,200. Both indices are being
dragged lower by big-cap tech as the majority of other leading ideas continue to base constructively.
Biocon
Key points from this report:
- Buy Biocon. Buy as the stock is forming the right side of a cup base with a pivot at INR 446.95. Recent momentum is driven by the launch of Semglee (insulin glargine injection) with its partner Mylan (MYL). Management targets $1B in biosimilar revenue by FY22 from $270M in FY20, with expected earnings growth of 30% through FY22.
- Strong pipeline. Biocon is the first company from India to have three FDA-approved biosimilars. The company has a rich pipeline of 28 biosimilar products, of which 11 are co-developed with Mylan. As of December 2019, Biocon biosimilars reached 1.29M patients, and the company aims to reach 5M patients by FY22.
- Recent news. Equillium (EQ) has completed a pre-IND meeting with the FDA for the clinical development plans for itolizumab for the potential treatment of hospitalized COVID-19 patients. A phase 3 study is expected to begin in Q4. Itolizumab is an in-licensed drug from Biocon.
- Looking forward. The company will announce Q2 FY20 results in October. For FY20 and FY21, consensus expects EPS growth of 50% and 43%, y/y, respectively
O’Neil Health Care Weekly
Health Care Sector – Overview
Over the last five sessions, Health Care has declined by 1.1%. Health Care is the fourth-worst performing sector
over the last month.
Market View
The U.S. market remains in an Uptrend Under Pressure. The S&P 500 and Nasdaq pulled back toward their re-
spective 50-DMA this week, with the S&P 500 sitting just above that level and the Nasdaq just below. Distribution
stands at five and six days, respectively, with one day set to expire on the S&P 500 and two on the Nasdaq next
week.
Transportation and Basic Material were the only two positive sectors this week, each rising ~1%. Retail, Technol-
ogy, and Energy declined the most, falling ~3–5%. Utility and Energy remain the only two sectors trading below
both their respective 50- and 200-DMA, though Health Care is also trading just below its 50-DMA. Industry
groups holding up best over the last week include Home Furnishings, Household Appliances, Home Builders,
Leisure, Apparel, Rails, and Miners. 54% of S&P 500 stocks are trading above their respective 50-DMA and 57%
are trading above their respective 200-DMA, compared with 71% and 62%, respectively, last week.
Market View
U.S. Market
The U.S. market has been moved to an Uptrend Under Pressure. The Nasdaq reversed sharply off its upper
channel line Thursday and broke below its 21-DMA Friday. Though the index did find strong support at its 50-
DMA, we believe this sharp break lower will lead to choppy action over the next several days to weeks. The index
avoided distribution on Friday, though the count did increase to six this week. The S&P 500 also sold off sharply
but managed to close at its 21-DMA Friday and avoid distribution as selling pressure was more severe across
mega-cap tech leaders, which pulled back into their respective bases. We will be looking for indices to hold sup-
port at their respective 50-DMA (S&P 500: 3,299; Nasdaq: 10,858) next week.
Iqvia
Key points from this report:
- Buy IQV. The stock is actionable after breaking out of a six-week flat base. Iqvia is poised for double-digit earnings growth in 2021 and 2022, driven by the re-opening of global clinical research sites following the COVID-19 pandemic. A growing backlog amidst better-than-expected biotech funding is driving overall group performance.
Market View
U.S. Market
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq continued their push into higher
highs this week, trending constructively above all major moving averages. We will be looking for sideways con-
solidation at the index level in the coming days as megacap Tech ideas consolidate sharp gains over the last two
weeks. This should result in positive internal action as many growth ideas are building and breaking out from
secondary entry points. Though indices have become extended from shorter-term moving averages, all leading
technical indicators remain positive. We will become more concerned should distribution on the Nasdaq begin
to cluster near highs. Currently, the count stands at one and five days, respectively, with no expiration next week.
Market View
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq made new all-time highs this
week, holding trend along their respective 10- and 21-DMA. Distribution stands at one and six days, respec-
tively, though two days expire on the Nasdaq early next week.
Technology, Consumer Cyclical, and Retail led all sectors by a wide margin this week, gaining 2–3% each. Fi-
nancial, Capital Equipment, and Utility lagged, declining 1–2% each, while Energy broke back below its 50-
DMA after dropping 5%. Utility and Energy are the only two sectors trading below their respective 200-DMA.
Top-ranked industry groups outperforming this week include Medical Services, Internet, Software, Building Prod-
ucts, Home Furnishings, Trucks, and Discount Retail. With the resurgence in Technology, leadership did narrow.
65% of S&P 500 stocks are trading above their respective 50-DMA and 57% are trading above their respective
200-DMA, compared with 79% and 59%, respectively, last week.
Market View
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq remain above their respective 10-
and 21-DMA with one and five distribution days, respectively. No distribution days will expire next week, but two
will fall off the Nasdaq the following week. Resistance remains all-time highs of 3,393 on the S&P 500 and
11,121 on the Nasdaq before its upper channel line.
Long-term lagging sectors led by a wide margin this week with Transportation and Consumer Cyclical each
gaining more than 3%. Long-term leading sectors, Technology and Health Care, lagged, trading relatively flat
for the week. Leadership has broadened, resulting in all sectors trading above their respective 50-DMA and all
but Energy and Utility trading above their respective 200-DMA. Top-ranked industry groups outperforming this
week include Air Freight, Trucks, Auto Parts, Alternative Energy, Building Products, Discount Retail, Home Fur-
nishings, Leisure Products, and Semiconductors. 79% of S&P 500 stocks are trading above their respective 50-
DMA and 59% are trading above their respective 200-DMA, compared with 74% and 57%, respectively, last
week.
