Amid Rotation, I’m Adding to an Obscure Biotech and a Magnificent 7 Stock
Here’s my plan as AI stocks are sliding while money moves into the names that struggled for months, and biotech is leading the way.
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The gap in the two-tiered market is finally starting to close. AI-related names are under pressure, buy bouncing a bit as money is rotating into many of the stocks that have struggled for months. The Invesco QQQ Trust (QQQ) and the Roundhill Magnificent Seven ETF (MAGS) are lower, but breadth is running about 64% positive, and the iShares Russell 2000 ETF (IWM) is up 0.9%.
Biotech Shows the Way
Biotechnology is the clearest example of the rotation. The iShares Biotechnology ETF (IBB) rose on Wednesday while the rest of the market was slammed, and it is up another 2.1% today. The group was crushed while the mega-caps were hitting new highs, and now it is outperforming as they come under pressure.
This dynamic makes me more optimistic about the many opportunities that lie ahead, but don’t expect a smooth transition. It is going to be a bumpy ride, and with earnings season ramping up, volatility will be high. I’m looking for more entries, but I will continue to act incrementally. I have very little exposure to anything AI-related right now.
Adding on Good News
One name I added to today is NeurAxis (NRXS), which makes IB-Stim, a small device worn behind the ear that stimulates nerves to treat abdominal pain caused by irritable bowel syndrome and functional dyspepsia in patients as young as eight. The company announced this morning that a major national health insurer, which it didn’t name, has added coverage for about 26 million members. That brings its total to more than 147 million covered lives, up from about 120 million after a similar win in mid-September. For a small medical device company, insurance coverage is what turns doctor interest into actual sales, and two big wins in a month suggest the insurers are starting to follow each other. Management said it is hiring more salespeople to take advantage of it.
I’m also looking to add to my position in Amazon (AMZN). I’ve been slowly averaging into it and will start to ramp it up more, as I expect it to act better as its earnings report approaches.
At the time of publication, DePorre was long NRXS, AMZN.
