November 8, 2017

Q3 Share Price Performance in 2017 - Part 1

Very High Volatility and Mixed Performance

The key statistic from analysis of the 9-month share price performance is that 52 of 115 companies (45%) had share price changes greater than 40%.

For most of my personal biotech investing, I look for potential doubles in the next 12 months – it is always nice to see that there are opportunities for those returns. Volatility is not necessarily bad for this investment style as it can help share prices bounce off bottoms, or over-react to announcements, which are both positive and negative.

An investor should always ask ‘how does the average share price change compare with some benchmarks in Q2?’

U.S. markets will sometimes drag the Canadian indices along for the ride, up or down. Volatility of the S&P 500 as measured by the VIX is at its lowest point of 2017 and the U.S. markets have churned to all-time highs through much of 2017.

How does all this affect the Canadian healthcare sector? The Russell 2000 is viewed as the U.S. small cap index. On May 12, 2017, the lowest and median market caps of the companies in this index were U.S. $144 M and U.S. $784 M, respectively. Most of the Canadian healthcare companies in our analysis are microcaps and, unless U.S. trends drive investors to the sidelines, there is no correlation between their performance and U.S. market performance.

The development stage Canadian healthcare companies generally rely upon institutional investors for funding and retail investors for liquidity between deals. The share price changes which I have summarized and assessed each quarter reflect retail trading, general sector sentiment, broad stock market trends and, most importantly from my perspective, corporate events and performance.

In the next blog post, I will assess the Q3 and 9-month 2017 share price performance of the Tier 1 Canadian healthcare companies.

[The author and his immediate family members may have long or short positions in the shares of some companies mentioned in or assessed during the preparation of this blog. Past share price performance may not be an indicator of future share price performance. This blog does not consider the investment objectives, financial situation or particular needs of any particular person. Investors should obtain professional advice based on their own individual circumstances before making an investment decision.]

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