For Immediate Release
Chicago, IL – July 14, 2022 – Today, Zacks Investment Ideas feature highlights Biotechnology ETF IBB, Vertex Pharmaceuticals, Inc. VRTX.
The Overlooked Difference in June’s Inflation Report
Wednesday morning, the Bureau of Labor Statistics reported that U.S. consumer prices surged 9.1% in June, marking the largest annual increase in more than four decades. Higher costs for gasoline, food and shelter have stubbornly persisted as the summer has rolled along. But there’s one key difference between this report and May’s inflation reading (which was released in June).
And that difference is the market’s reaction to the news. The market is a forward-looking mechanism. Back on June 10th, the release of May’s inflation data (which also marked a 40-year high) coincided with a large gap down in the midst of a leg lower for stocks.
Yesterday’s reaction to a high CPI print is the opposite.
It appears stocks have found support at an important level and are taking this higher inflation reading in stride. Maybe market participants found some positives in the report, signaling potential signs of inflation peaking. Or maybe selling pressure has become exhausted. Either way, the market’s reaction is noticeably different than last month.
What’s been leading on the way back up? One of the pockets of the market that has been outperforming since the mid-June bottom is biotechnology. The iShares Nasdaq Biotechnology ETF has advanced about 17.4% since that date, nearly tripling the 6% return from the Nasdaq.
The iShares Nasdaq Biotechnology ETF seeks to track the investment results of an index composed of U.S.-listed equities in the biotechnology sector. While IBB started off the year on a sour note along with the market, it has since turned back up and is making a series of higher highs.
Let’s take a look at a leading stock within the IBB ETF. This company is the largest holding within IBB at 7.31%. It is part of the Zacks Medical – Biomedical and Genetics industry, which currently ranks in the top 29% out of approximately 250 industries.
Vertex Pharmaceuticals, Inc.
Vertex Pharmaceuticals is a biotechnology company that creates transformative medicines for people with serious and life-threatening diseases. VRTX develops and commercializes therapies targeting disorders such as cystic fibrosis, kidney disease, diabetes, and musculoskeletal pain. The company has collaborations with several well-known players in the industry such as Moderna and CRISPR Therapeutics. Vertex Pharmaceuticals was founded in 1989 and is headquartered in Boston, MA.
VRTX has exceeded earnings estimates in three of the past four quarters, sporting an average +7.56% beat over that timeframe. The stock has responded favorably and has advanced nearly 33% this year alone.
The estimates appear favorable for both sales and earnings, as this year they are expected to rise 13.3% (to $8.58 billion) and 8.6% (to $14.14/share), respectively.
Make sure to put VRTX on your watchlist as we head into the second half of the year.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.