Canadian biotech investors have been advised to take a short stance on one particular class of stocks in the space.
In a research report to clients, Mackie Research Capital analyst Andre Uddin dispensed a dose of reality with regards to the Canadian biotech sector, according to Cantech Letter
. While the space benefited from a seasonal strength pattern that lasted from Dec. 16 to Feb. 18, Uddin said it is now against “an unbreakable wall”: the 300 level on the IBB (NASDAQ Biotech Index ETF).
While that ceiling holds strong, Uddin has advised investors to avoid one area. “Canadian specialty pharma companies with legacy assets remain a mess,” he said. “[T]hey overpaid for weak assets and are now filled with debt.”
Instead, Uddin advised clients to go for stocks under a theme of innovation, which he said will be important this year. “To counter the risks associated with volatility in the biotech sector … investors should remain focused on companies with clean balance sheets, disruptive R&D programs, late-stage assets and novel products to be or recently launched.”
Uddin cited Aurinia and Theratechnologies as his firm’s top picks. Two other names he cited were the TSX-listed Knight Therapeutics and Pediapharm, for which he had ratings of “hold” and “speculative buy,” respectively.
Why 2016’s returns could be cannibalized this year
Market conditions, economy could push Trump rally further
More market talk: