0

I was wondering why LABU, which is a 3x times leveraged biotechnological ETF, went down in July 2015. I understand that it tries to track SPSIBI (Biotech Index) whose top ten holdings are: ICPT, SRPT, REGN, LGND, ESPR, HRTX, ANAB, NBIX, VRTX, ALNY

Based on Yahoo Finance, some of these stocks had a very bad year in 2015 (especially ESPR, ALNY, and others).

Why was that? Does anybody remember what happened? Was it due to some state regulation or was it because of the poor performance of those particular companies?

I was unable to find reasons for why it went down so I'd like to ask here. Thanks for any helpful comment.

3

From the chart, LABU peaked in July, shortly after its launch, and mainly declined (along with the biotech sector generally) in August and September 2015. Articles from the time mention that the biotech decline happened after a huge rise that got ahead of itself, and that political concerns about regulation of drug prices contributed (culminating in a tweet by presidential candidate Hillary Clinton in September 2015).

From a broader perspective, ETFs and especially leveraged ETFs tend to be launched after a sector has shown large gains, so it is not too surprising that LABU stumbled shortly after its launch, as such performance-chasing ETFs are usually late to the party.

| improve this answer | |
  • So it was a mix of fundaments (tweets) and overbought market. Thank you. – Jan Jůna Sep 21 '18 at 10:18

Not the answer you're looking for? Browse other questions tagged or ask your own question.