Health Bill Profit Opportunity

Yesterday morning was the bears’ big chance. Futures were down, resistance at S&P 500 1,165 had held and there was a steady stream of seemingly negative news. Greece was still a question mark, trade relations between the U.S. and China was getting tense, and the controversial health care bill had just passed. There was enough uncertainty in the air to drive the S&P 500 to an early test of support at 1,150.   

That was the moment. 1,150. And the sellers couldn’t take it lower. In fact, the bulls took control and pushed the S&P 500 back above 1,165. As I wrote last week, there is very little resistance between 1,165 and 1,200. I think the odds are good that we see S&P 500 1,200 in the near future.   

Now, I want to switch gears and discuss the Nasdaq a little, because it’s been outperforming the other major indices by a wide margin. The S&P 500 is up 2.8% for the year. The Nasdaq, on the other hand, is up 4.3%.   

That’s not a huge surprise. After all, technology stocks should be expected to outperform the broader market as an economy recovers from a recession. That’s because tech stocks benefit from corporate spending, and corporate spending always recovers faster than consumer spending.   

Not only do corporations seek out technological solutions to become more efficient as they are cutting payroll costs to adjust to lower demand, technology is also critical for expansion.   

So it’s reasonable that the Nasdaq is outperforming. And, further, it’s reasonable to assume that it’s tech stocks leading the way. Reasonable, but not necessarily correct.   

TradeMaster Daily Stock Alerts’ Jason Cimpl recently alerted me to a massive inflow of investment dollars into the into the biotech sector. And a little digging showed clearly that it’s biotech, not the technology benchmark semiconductors, that are leading the Nasdaq higher.   

The First Trust ARCA Biotech Index (Nyse:FBT) is up 29% this year. The Philadelphia Semiconductor Index (SOX) is essentially flat for the year.   

That’s not just an interesting statistic. It’s potentially money-making. There have been several blockbuster buyouts in the biotech space this year. Intermune’s (Nasdaq:ITMN) recent 173% is perhaps the most dramatic example. Perhaps more significant is the recent bid for OSI Pharmaceuticals (Nasdaq:OSIP) by Astellas.   

Astella wants to buyout OSI for $3.5 billion, or $52 a share. That was a nice premium from OSI’s closing price of $37.02 on February 26, 2010, the day the deal was announced.  

But OSI doesn’t want to be bought out. Even though the company is doing $428 million in sales, the $3.5 billion offer isn’t enough. Clearly, OSI expects to either make more money or get a better offer. In a nutshell, this is what’s driving biotech stocks. 

In fact, the situation got a little more interesting with the passage of the health care bill on Sunday. Now the uncertainty of the health care debate is lifted, we’ve already seen insurance companies start to rally. And the rally in the healthcare sector may be kicking into high gear. After all, it’s no secret that Big Pharma like Pfizer (NYSE:PFE) and Merck (NYSE:MRK) have depleted pipelines. And with $35 billion in cash between them, acquisitions are likely.

Jason Cimpl just released a Special Opportunity Report to his TradeMaster Daily Stock Alerts members that features 5 small biotech stocks that could make some big profits for investors. One of these stocks is up 7% since yesterday. Another is up 11% in two days. There’s a lot more room for these stocks to run. To learn more about Jason’s Special Opportunity Report, click HERE.