Biotech could be best pick ‘in a world where there’s no value’: Investor

Biotech stocks this week hit their highest levels since January, and some analysts say the stocks have room to run.

The iShares Nasdaq biotechnology index (IBB), which tracks the performance of biotech and pharmaceutical companies listed on the Nasdaq, hit its highest levels in seven months on Thursday.

"We believe that you're going to see consistent revenue growth, as well as improvement within operating margins over the next three to five years," said Chad Morganlander, portfolio manager with Stifel Nicolaus.

"In a world where there's no value, this one, certainly, I would serve up as a value play," Morganlander said Thursday on CNBC's "Power Lunch."

Morganlander added one strong player in the space is Amgen, the multinational biopharmaceutical company that comprises 8.32 percent of the IBB; this is the second-largest weighted company in the index, after Celgene.

Amgen, said Morganlander, is a "dividend grower," with a yield of 2.3 percent, and a growth rate of between 15 and 20 percent. He places a price target of about $200.

The IBB hit an all-time high a little over a year ago. Since then, the group has come down quite a bit, plummeting in the first few weeks of 2016.

This bounce the ETF is enjoying since those low levels in January has made several analysts more bullish on the sector.

"We are seeing something occur very different on the desk here. We're seeing people versus selling every rally, or shorting every rally, coming in now and buying every dip," said David Seaburg, Cowen's head of equity sales trading, on "Power Lunch."

"We're seeing a big sentiment shift in general; people getting very comfortable, and that's mainly right after a lot of big-cap names have reported good quarters, decent guides," said Seaburg.

It's not all tulips and roses for biotech stocks, however. Bristol-Myers shares tanked Friday on news of a failed clinical trial for a key cancer drug.


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Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

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