While Large/Mid Cap Biotechnology companies are boasting rising profitability, better cash flows, and stronger drug pipelines, the Small/Micro Cap Biotech firms, in general, have little tangible to show and valuations may be above the comfort zone.
Despite this sector’s extended outperformance, we think this trend may persist in the near term as Discretionary industry groups look increasingly attractive within our group work. Keeping an eye on the Fed Funds rate is key, however.
Our long term view towards China is positive (especially relative to other large EM countries), but short term, we see signs of the A-shares segment overheating and caution against near term corrections.
Performance of this thematic group has been strong but the domestic Big Four networks are facing increasing competition overseas. However, there is still a much better growth profile compared to many other industries.
Lower energy prices will benefit the paper industry as it is among the most energy intensive of Materials groups. Yet, global implications may produce a headwind, offsetting the benefit of lower oil costs.