(Bloomberg) - Artificial intelligence is set to help bring years of biotech stock underperformance to an end, according to a top European fund manager.
The biotech sector is showing significant catch-up potential, after missing out on the investor euphoria that’s driven AI stocks to new heights in recent months, said Hans Peter Portner, who manages Banque Pictet & Cie’s largest fund, Global Megatrend Selection.
“We are ahead of a massive wave of new innovation in general, but in particular within biotech due to AI,” Portner said in an interview in Geneva. He said he expects Pictet’s biotech-focused fund to double in size in the next three years.
The firm’s broader Global Megatrend Selection fund has about $13.4 billion in assets under management. It has gained about 23% in the past year, compared to a 32% increase in the S&P 500. The fund has outperformed about 75% of peers, according to data compiled by Bloomberg.
The use of AI in biotechs is widespread, with several companies acquired or partnered up with machine learning firms whose products can speed up and simplify R&D but also sort data much faster. AI is also used by some to discover and develop potential treatments. Companies that use AI in this field include Gilead Sciences Inc, Genentech Inc, a subsidiary of Roche Holding AG as well as Agilent Technologies Inc.
The Russell 2000 Index Biotechnology Subsector has lagged the Nasdaq 100 Index over the past 12 months, while the contrast is even more stark across a five-year period: the tech benchmark has gained about 150% in that time, while the biotech gauge is up by about 7% as of Friday’s close.
Still, the sector has been boosted lately by a string of acquisitions as drugmakers have sought to bolster their pipelines, and the Russell index is up more than 50% since an October low.
A total of 46 listed biotech deals worth more than $100 billion were announced last year, the highest since spending peaked in 2019, according to data compiled by Bloomberg.
Biotech Picks
Within biotech, Portner recommends innovative small and midcap stocks, saying “it’s probably the sector with the most idiosyncratic risk, which makes it interesting for a stock picker.” Springworks Therapeutics Inc., Xenon Pharmaceuticals Inc. and Cytokinetics Inc. are among stocks to which the fund already has exposure.
Beyond biotech, Nvidia Corp. and Netflix Inc. are among Portner’s top holdings. He also likes Novo Nordisk A/S in Europe, along with luxury stocks.
When investing in technology, Portner advised against chasing stocks just for price. “Tech investing is not about finding cheap companies,” he said. “Cheap companies in tech are value traps.”
By Allegra Catelli
With assistance from Naomi Kresge and Ian King
