Lately, stocks that have been spiking have primarily been biotech companies. For some insight into my trading strategy, I rarely trade biotech’s due to their inconsistent patterns and the fact that they’re much less predictable. By nature, biotech’s rarely ever succeed and are always faced with underfunding and the FDA. Fortunately for me, I’m only trading based on current and preceding price action, not investing long-term in any of these companies. This analysis was born from the fact that I was searching for the data and simply couldn’t find it. Since the biotech stocks have been surging lately, I asked myself how big this industry/sector really was relative to the total size of the NASDAQ. There’s at least 50 different ways to segment this data, but I put together a rather rudimentary take on it. More importantly, I’m including the data file as of June 2015 at the end of this post to help you learn more about the industries and sectors you trade.
Biotech companies are an industry within the Healthcare subsector above, which constitutes 5.3% of the overall NASDAQ, and 25% of the Healthcare subsector. I then decided to further segment by market cap. Those results are below using this table for market cap $ thresholds. I get a lot of questions from newer members in profit.ly chat about where exactly the cutoff points are for a “nano-cap” versus a “micro-cap” company. This table below will help clear that up. There can be some slight differences depending on the data source but these are generally regarded as true. Note: If you use Nasdaq.com for viewing the data table note that their market cap filters aren’t exactly accurate based on the $ amount.
I found the results of the above table rather surprising. I expected to see heavy biotech consolidation in the nano/micro-cap categories but there’s in fact, consistent representation across all categories except Mega-cap, which is 100% comprised of web/technology stocks.
As mentioned above, this was a rather simple exercise but when you’re trading every day, it’s nice to know the size of the market you’re playing in and even though I’m only trading a few setups in one strategy, it’s good to use this type of data to have a more holistic perspective on the market to know where you fit in. I encourage you to download the full dataset below and take a look at some of the other subsectors and industries that may be of interest to you.
Original Data File: Sourced from Nasdaq.com available here