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Biotech just entered a correction, but it could be your best chance to buy



Biotech stocks have officially entered a correction, breaking key support, but it could actually mark a tremendous buying opportunity for the beaten group.

The iTradebuddy.onlines Nasdaq Biotechnology ETF, the IBB, slid on Tuesday below its 200-day moving average on an intraday basis for the first time since May. This leg lower placed the ETF 11 percent off its 52-week highs, touched in early October.

This move comes on the back of a string of disappointing earnings for mega-cap biotech in late October, said Chad Morganlander, portfolio manager at Washington Crossing Advisors; he pointed specifically to disappointments from Gilead and Celgene. Still, he likes the space.

“This creates a window of opportunity,” Morganlander said Monday on CNBC’s “Trading Nation.”

“We would actually look toward overweighting the biotech industry, because we’re quite positive on the health-care industry as a whole. We think that the regulatory issues, as well as government concerns, are going to be a passing issue,” he added.

He recommends shares of Amgen, as he likes the company’s growth prospects, with “very little debt and a lot of cash.” Morganlander also sees less volatility in the stock ahead over the next one to two years.

Others are optimistic given biotech’s strength relative to its plunge seen two years ago.

“One of the things that people are worried about is, are we going to get a repeat of what we saw in 2015, when the IBB crashed 40 percent in just six months. But the set-up is much, much different than it was back then,” said Matt Maley, equity strategist at Miller Tabak.

The group was “wildly” outperforming the broader market that year, Maley recalled Monday in a “Trading Nation” segment on CNBC’s “Power Lunch,” and investors’ positioning was overweight to an extreme level, along with people adding more leverage to the group. He doesn’t see such behavior this year.

Since the U.S. election last November, Maley added, the group hasn’t been as high-flying and doesn’t appear to have the same risk of deleveraging as it did before it plunged two years ago.

Disclosure: Chad Morganlander’s firm, Washington Crossing Advisors, owns shares of Amgen.


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Stock Markets

Guess shares tank on lower-than-expected quarterly sales



Tradebuddy.onlines of Guess Inc. GES, +0.96% fell 12% late Tuesday after the retailer reported third-quarter sales that missed Wall Street expectations. Guess said it lost $2.9 million, or 4 cents a share, versus earnings of $9.1 million, or 11 cents a share, in the year-ago period. Adjusted for one-time items, Guess earned $10.4 million, or 12 cents a share, compared with $9.6 million, or 11 cents a share a year ago. Sales rose 3.3% to $554 million, compared with $536 million a year ago. Analysts surveyed by FactSet had expected adjusted earnings of 12 cents a share on sales of $564 million. Retail revenue in the Americas fell 11%, offset by increases in Europe and Asia, the company said.

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This Little-Known Chinese Stock Is on Fire — The Motley Fool



Chinese stocks have done reasonably well in 2017, with the Shanghai Composite Index up about 10%. Yet that’s lower than the 15% return of the S&P 500, and when compared with emerging markets overall and the MSCI EM Index’s 25%-plus return, China’s stock market has underperformed.

However, it’s been a strong year for stocks of Chinese companies listed in the United States through American depository shares (ADS). High-profile Chinese companies such as Alibaba (NYSE:BABA) and (NASDAQ:JD) have provided investors year-to-date returns of 106% and 52% as of this writing. Even better, shares of social-media live-streaming platform provider YY (NASDAQ:YY) have blown both out of the water. Below, you’ll find what you need to know about this company.

JD data by YCharts

YY has a long runway for growth

Like Alibaba and, YY benefits from demographic tailwinds. About 731 million Chinese citizens — more than half of the total population — had Internet access as of year-end 2016. That figure has rapidly increased, growing by approximately 19% per year since 2005. Not only are more Chinese citizens gaining Internet access, but the ranks of the middle class with disposable income are swelling. The Brookings Institute estimates middle-class consumption in the Middle Kingdom will grow 8.5% per year until 2030.

As the leading live-streaming mobile and PC provider, YY benefits from both increased Internet penetration rates and disposable income from a rising middle class. The company currently has 73 million mobile live streaming monthly active users, a 37% year-over-year increase. Look for user growth to continue from its host of online-dating, music, gaming, and sports sites.

YY had a strong quarter

YY’s run appears to be mostly supported by the financials. In the recently reported third quarter, the company increased net revenue 48% from last year’s quarter and net income per ADS by 52%, and the pace of that growth has been quite a bit higher than those who follow the stock closely had anticipated. The company expects strong top-line growth to continue, issuing projections for sales to grow in the fourth quarter by between 36% and 41%. 

Picture of Shanghai at night.

Image source: Getty Images

YY is relatively cheap

Unlike its Chinese peers Alibaba and, YY is cheaply valued, with shares currently trading at a forward earnings multiple of about 15 times what investors expect YY to earn in 2018. That’s attractive in comparison to the S&P 500’s corresponding forward multiple of about 20. Meanwhile, Alibaba and trade at much more expensive valuations of 36 and 42 times forward earnings estimates, respectively.

It’s not often you find a company growing its top and bottom lines approximately 50% while trading at multiples lower than the overall market. If you’re an investor in Alibaba and and are looking for more ways to profit from the demographic shift in China, put YY on your due-diligence list before Wall Street catches wind of the name.



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