Thinking about buying into biotech ahead of the JPMorgan Health Care Conference? History says the best play is to buy the day before the meeting starts and hold until the end.
The JPMorgan conference, from Monday to Thursday, is the health industry's biggest annual event, setting the agenda for the year. Sentiment out of the conference can dominate the first half of the year.
"It may be the most important health-care conference in investment banking," said Les Funtleyder, portfolio manager at E-Squared Asset Management and author of "Health-Care Investing."
More than 400 companies present to thousands of conference attendees—not to mention the thousands more who flock to San Francisco for ancillary meetings.
Because biotech is notoriously volatile, we asked Kensho, a quantitative analysis investing tool, how history suggests playing it.
Here's what it told us, looking at 18 years of the conference:
- The usually rises during the week of the conference; it's up 77 percent of the time, with an average return of 0.32 percent over five days. But both the SPDR Health Care ETF and the iShares Nasdaq Biotech ETF typically outperform the S&P that week. Health care has returned an average of 1.56 percent, while biotech has increased an average 2.1 percent.
- If you sell the first day of the conference, history would suggest you'd miss out on the broader gains. Health care is usually up 0.76 percent the first day, while biotech usually rises 0.36 percent.
- What have been the best stocks to buy? This is as pure a case of "past performance doesn't guarantee future returns" as it gets. These data are skewed by gigantic, single-time gains. But for curiosity's sake, here's what the data say:
- If you're holding for the whole conference, Cerus, Ariad and Illumina have the best historic returns, all rising an average of 11 percent over the last 18 years, Kensho says. Sinovac has returned 9.7 percent on average, while Sangamo has returned 8.5 percent.
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- Cerus' results were boosted by its performance in 1999, when it had positive news on a late-stage clinical trial, Kensho tells us. And Ariad, while holding one of the highest average returns, is volatile; it was positive only half the time.
- Which are the most consistently positive health-care companies five days after the start of JPMorgan? Varian Medical, which is positive 88 percent of the time; Albany Molecular Research, positive 86 percent of the time; Illumina, up 85 percent of the time; Alkermes, higher 83 percent of the time; andGilead, also up 83 percent of the time.
So how bout them apples? See you in San Francisco.
Disclosure: NBCUniversal, parent of CNBC, is a minority investor in Kensho.