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Biotech ETF Tops in June: 5 Stocks That Outperform

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Virtus LifeSci Biotech Clinical Trials ETF (BBC - Free Report) topped the list of the best-performing U.S. equity ETFs in June, gaining about 10%. The rally was driven by traders’ “short squeeze” and investors’ bargain hunting.

Although most of the stocks in BBC’s portfolio have delivered strong returns this year so far, a few have gained more than 45%. These include Day One Biopharmaceuticals (DAWN - Free Report) , Mirati Therapeutics Inc. (MRTX - Free Report) , Lyell Immunopharma Inc. (LYEL - Free Report) , Kezar Life Sciences Inc. (KZR - Free Report) and Repare Therapeutics Inc (RPTX - Free Report) .

Traders on forums such as Reddit's WallStreetBets acted to bid up shares of heavily-shorted stocks, triggering a phenomenon known as a "short squeeze", which pushes up the stock prices higher. Notably, short squeeze is a term used by market participants to refer to a phenomenon where short-sellers in a stock, who placed their bets on its fall, rush to hedge their positions or buy the stock in the event of an adverse price movement to cover their losses. This leads to a sharp rise in demand for the share and a huge rally in share prices.

Additionally, the steep sell-off in the stock market induced a huge decline in biotech stocks. This made the valuations attractive, compelling investors to flock to the bargain stocks heading into the second half of 2022 (read: 4 Sector ETFs That Survived Market Turmoil in June).  

Let’s take a closer look at the fundamentals of BBC.

BBC in Focus

Virtus LifeSci Biotech Clinical Trials ETF offers exposure to companies with promising drugs in clinical human trials that have not yet been approved by the FDA or gone into production. It follows the LifeSci Biotechnology Clinical Trials Index and holds 121 securities in its basket with none accounting for more than 2% share.

Virtus LifeSci Biotech Clinical Trials ETF amassed $15.6 million in its asset base and charges 79 bps in fees per year from its investors. It carries a Zacks ETF Rank #3 (Hold) with a High-risk outlook.

Below we highlighted the above-mentioned five stocks in the ETF with their respective positions in the fund’s basket:

Best-Performing Stocks of BBC

Day One Biopharmaceuticals is a clinical-stage biopharmaceutical company. It dedicated to developing and commercializing targeted therapies for patients of all ages with genetically defined cancers. Day One Biopharmaceuticals has an estimated earnings growth rate of 56.7% for this year. The stock makes up for 0.76% share in the BBC basket and has soared 182% in a month.

Day One Biopharmaceuticals has a Zacks Rank #3 and a Momentum Score of B.

Mirati Therapeutics is a clinical-stage biotech developing kinase inhibitors and KRAS inhibitors. The stock has soared 71.7% in June and makes up for a 0.87% share in the BBC basket.

Mirati Therapeutics’ earnings are expected to decline 28.2% this year (read: A Comprehensive Guide to Genomic ETFs).

Lyell Immunopharma is a T-cell reprogramming company dedicated to the mastery of T cells to cure patients with solid tumors. The stock has jumped 62% this month and accounts for a 1% share in the ETF.

Lyell Immunopharma has an estimated earnings growth rate of 34.8% for this year. It has a Zacks Rank #4 (Sell) and a Momentum Score of A.

Kezar Life Sciences is a bio-technology company that discovers and develops molecule therapeutics and medicines, such as protein homeostasis for autoimmune disorders. The stock has rallied 57% in June and makes up for 1.1% of the BBC portfolio.

Kezar Life Sciences has an estimated earnings decline rate of 8.6% for this year. It has a Zacks Rank #2 (Buy) and a Momentum Score of A. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Repare Therapeutics is an oncology company utilizing genome-wide, CRISPR-enabled SNIPRx platform to discover and develop targeted cancer therapies focused on genomic instability, including DNA damage repair. The stock has been up 48.3% in a month and has an estimated earnings decline rate of 17.7% for this year.

Repare Therapeutics currently has a Zacks Rank of 3 and a Momentum Score of A. It accounts for a 0.68% allocation to the BBC basket.

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