The SPDR S&P Biotech ETF (XBI) is up about 32% in the past twelve months, in new high territory, while the broader market is up about 18% during the same period. Within that group, many small-cap biotech stocks (those with market-caps of less than $2 billion) are up even more sharply. These small-cap biotech companies are generally considered very speculative and a risky investment, in contrast to large-cap and some mid-cap biotech companies that have well established commercialized product portfolios that generate revenues, and maybe even profitability. We believe it is significant when the world’s largest or mega money managers invest even a small portion of their portfolio in these small-cap biotech companies, thereby giving their seal of approval in what is otherwise considered a very risky investment.
These mega fund managers, such as Fidelity Investments, Goldman Sachs (GS), BlackRock Inc., Vanguard Group, and 23 others, manage between $100 billion