iShares NASDAQ Biotechnology (IBB). For years, I have been advocating non-cyclical sectors that are less tied to interest rates. It has led to client ownership of funds like SPDR Select Healthcare (XLV), PowerShares Pharmaceuticals (PJP) and iShares Aerospace and Defense (ITA). Yet, in spite of clear-cut relative strength in the ETF world, I have not chosen to board the biotech bandwagon in its purset form.
Funds like SPDR Biotech (XBI) and IBB have literally defied gravity better than Sandra Bullock in a space suit. Does it make sense to buy a sub-sector that has become so speculative, that it now trades at a 60% premium to a fully valued market? Is it it sensible to embrace a sub-sector investment with a price-to-book (P/B) north of 11 and a trailing price-to-earnings (P/E) of 42? Or is the biotech boom showing shades of dot-com mania in 1999?